S 1288 ISCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 to increase the retirement security of women and small business owners, and for other purposes.CommentsClose CommentsPermalink

May 3, 2007

Mr. SMITH (for himself, Mr. CONRAD, Mr. KERRY, Mr. BINGAMAN, and Ms. SNOWE) introduced the following bill; which was read twice and referred to the Committee on FinanceCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 to increase the retirement security of women and small business owners, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the `Women's Retirement Security Act of 2007'.CommentsClose CommentsPermalink





(b) Amendment of 1986 Code- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.CommentsClose CommentsPermalink





(c) Table of Contents- The table of contents for this Act is as follows:CommentsClose CommentsPermalink





Sec. 1. Short title; amendment of 1986 Code; table of contents.CommentsClose CommentsPermalink

TITLE I--PROVISIONS TO INCREASE RETIREMENT SAVINGS

Subtitle A--Employee Access to Retirement Savings at Work

Sec. 101. Employees not covered by qualified retirement plans or arrangements entitled to participate in payroll deposit IRA arrangements.CommentsClose CommentsPermalink





Sec. 102. Credit for small employers maintaining payroll deposit IRA arrangements.CommentsClose CommentsPermalink





Sec. 103. Establishment of automatic IRAs.CommentsClose CommentsPermalink





Sec. 104. Establishment of TSP II Board.CommentsClose CommentsPermalink

Subtitle B--Other Provisions

Sec. 111. Modifications to computation of saver's credit; saver's credit made refundable.CommentsClose CommentsPermalink





Sec. 112. Qualified cash or deferred arrangements must allow long-term employees working more than 500 but less than 1,000 hours per year to participate.CommentsClose CommentsPermalink





Sec. 113. Transfers of unused benefits of health flexible spending arrangement to certain retirement plans.CommentsClose CommentsPermalink





Sec. 114. Computation of limits on IRA and Roth IRA contributions.CommentsClose CommentsPermalink

TITLE II--PROVISIONS PROVIDING FOR PRESERVATION OF INCOME

Sec. 201. Exclusion of certain qualified annuity payments.CommentsClose CommentsPermalink





Sec. 202. Exclusion for lifetime annuity payments.CommentsClose CommentsPermalink





Sec. 203. Joint study of application of spousal consent rules to defined contribution plans.CommentsClose CommentsPermalink





Sec. 204. Facilitating longevity insurance.CommentsClose CommentsPermalink

TITLE III--PROVISIONS ENSURING EQUITY IN DIVORCE

Sec. 301. Special rules relating to treatment of qualified domestic relations orders.CommentsClose CommentsPermalink





Sec. 302. Elimination of current connection requirement under Railroad Retirement Act for certain survivors.CommentsClose CommentsPermalink





Sec. 303. Permitting divorced spouses and widows and widowers to remarry after turning 60 without a penalty under Railroad Retirement Act.CommentsClose CommentsPermalink





Sec. 304. Repeal of jurisdictional requirement for court to treat military retirement pay as property of the military member and spouse.CommentsClose CommentsPermalink





Sec. 305. Modification of reductions in disposable retired pay for payments in compliance with court orders.CommentsClose CommentsPermalink

TITLE IV--PROVISIONS TO IMPROVE FINANCIAL LITERACY

Sec. 401. Grants to community-based taxpayer clinics to provide retirement savings advice.CommentsClose CommentsPermalink





Sec. 402. Treatment of qualified retirement planning services.CommentsClose CommentsPermalink





Sec. 403. Retirement handbook and retirement readiness checklist.CommentsClose CommentsPermalink

TITLE V--INCENTIVES FOR SMALL BUSINESSES TO ESTABLISH AND MAINTAIN RETIREMENT PLANS FOR EMPLOYEES

Sec. 501. Credit for qualified pension plan contributions of small employers.CommentsClose CommentsPermalink





Sec. 502. Deduction for pension contributions allowed in computing net earnings from self-employment.CommentsClose CommentsPermalink





Sec. 503. Exemption of deferral-only qualified cash or deferred arrangements from top-heavy plan rules.CommentsClose CommentsPermalink





Sec. 504. Extension of time for small pension plans to adopt required plan qualification amendments.CommentsClose CommentsPermalink

TITLE I--PROVISIONS TO INCREASE RETIREMENT SAVINGS

Subtitle A--Employee Access to Retirement Savings at Work

SEC. 101. EMPLOYEES NOT COVERED BY QUALIFIED RETIREMENT PLANS OR ARRANGEMENTS ENTITLED TO PARTICIPATE IN PAYROLL DEPOSIT IRA ARRANGEMENTS.

(a) In General- Subpart A of part I of subchapter A of chapter 1 (relating to pension, profit-sharing, stock bonus plans, etc.) is amended by inserting after section 408A the following new section:CommentsClose CommentsPermalink

`SEC. 408B. RIGHT TO PAYROLL DEPOSIT IRA ARRANGEMENTS AT WORK.

`(a) Requirement To Provide Payroll Deposit IRA Arrangement- Each employer (other than an employer described in subsection (e)) shall provide to each applicable employee of the employer for any calendar year the opportunity to participate in a payroll deposit IRA arrangement which meets the requirements of this section.CommentsClose CommentsPermalink





`(b) Payroll Deposit IRA Arrangement- For purposes of this section--CommentsClose CommentsPermalink





`(1) IN GENERAL- The term `payroll deposit IRA arrangement' means a written arrangement of an employer--CommentsClose CommentsPermalink





`(A) under which an applicable employee eligible to participate in the arrangement may elect to contribute to an individual retirement plan established by or on behalf of the employee by having the employer make periodic direct deposit or other payroll deposit payments (including electronic payments) to the plan by payroll deduction, andCommentsClose CommentsPermalink





`(B) which meets the requirements of paragraph (2).CommentsClose CommentsPermalink





`(2) ADMINISTRATIVE REQUIREMENTS- The requirements of this paragraph are met with respect to any payroll deposit IRA arrangement if--CommentsClose CommentsPermalink





`(A) the employer must make the payments elected under paragraph (1)(A) on or before the later of--CommentsClose CommentsPermalink





`(i) the due date for the deposit of tax required to be deducted and withheld under chapter 24 (relating to collection of income tax at source on wages) for the payroll period to which such payments relate, orCommentsClose CommentsPermalink





`(ii) the 30th day following the last day of the month with respect to which the payments are to be made,CommentsClose CommentsPermalink





`(B) subject to a requirement for reasonable notice, an employee may elect to terminate participation in the arrangement at any time during a calendar year, except that if an employee so terminates, the arrangement may provide that the employee may not elect to resume participation until the beginning of the next calendar year,CommentsClose CommentsPermalink





`(C) each employee eligible to participate may elect, during the 60-day period or other period specified by the Secretary before the beginning of any calendar year (and during the 60-day period or other period specified by the Secretary before the first day the employee is eligible to participate), to participate in the arrangement, or to modify the employee's election under the arrangement (including the amounts subject to the arrangement and the manner in which such amounts are invested), for such year,CommentsClose CommentsPermalink





`(D) the employer provides--CommentsClose CommentsPermalink





`(i) immediately before the beginning of each period described in subparagraph (C), a notice to each employee of the employee's opportunity to make the election and the maximum amount which may be contributed to an individual retirement plan on an annual basis, andCommentsClose CommentsPermalink





`(ii) if the arrangement includes an automatic enrollment arrangement, the notices required under subsection (h) with respect to the automatic enrollment arrangement,CommentsClose CommentsPermalink





`(E) subject to subsection (f), the arrangement provides that an employee may elect to have contributions made to any individual retirement plan specified by the employee, andCommentsClose CommentsPermalink





`(F) if the arrangement does not include an automatic enrollment arrangement--CommentsClose CommentsPermalink





`(i) the arrangement requires the employer to take all reasonable actions to solicit from all employees eligible to participate in the arrangement an explicit election to either participate or not to participate in the arrangement, andCommentsClose CommentsPermalink





`(ii) the arrangement provides that if an employee fails to make an explicit election under clause (i) within the time prescribed under the arrangement, the employee will be treated as having made an election to participate in the arrangement (and amounts shall be invested on behalf of the participant) in the same manner as if the arrangement had included an automatic enrollment arrangement under subsection (g).CommentsClose CommentsPermalink





`(c) Applicable Employee Defined; Related Definitions and Rules- For purposes of this section--CommentsClose CommentsPermalink





`(1) APPLICABLE EMPLOYEE-CommentsClose CommentsPermalink





`(A) IN GENERAL- The term `applicable employee' means, with respect to any calendar year, any employee--CommentsClose CommentsPermalink





`(i) who was not eligible under a qualified plan or arrangement maintained by the employer for service for the preceding calendar year, andCommentsClose CommentsPermalink





`(ii) with respect to whom it is reasonable to expect that the employee will not be eligible during the calendar year under such a qualified plan or arrangement.CommentsClose CommentsPermalink





`(B) SPECIAL RULES- For purposes of subparagraph (A)(i)--CommentsClose CommentsPermalink





`(i) ELIGIBILITY- An employee shall be treated as eligible under a plan for a preceding calendar year if, as of the last day of the last plan year ending in the preceding calendar year, the employee has satisfied the plan's eligibility requirements.CommentsClose CommentsPermalink





`(ii) EXCLUDED PLANS- A qualified plan or arrangement shall not be taken into account under this paragraph if--CommentsClose CommentsPermalink





`(I) the plan or arrangement is frozen as of the first day of the preceding calendar year, orCommentsClose CommentsPermalink





`(II) in the case of a plan or arrangement under which the only contributions are discretionary on the part of the sponsor, there has not been an employer contribution made to the plan or arrangement for the 2-plan-year period ending with the last plan year ending in the second preceding calendar year and it is not reasonable to assume that an employer contribution will be made for the plan year ending in the preceding calendar year.CommentsClose CommentsPermalink





`(2) EXCLUDABLE EMPLOYEES- An employer may elect to exclude from treatment as applicable employees under paragraph (1)--CommentsClose CommentsPermalink





`(A) employees described in section 410(b)(3),CommentsClose CommentsPermalink





`(B) employees who have not attained the age of 18 before the beginning of the calendar year,CommentsClose CommentsPermalink





`(C) employees who have not completed at least 3 months of service with the employer,CommentsClose CommentsPermalink





`(D) in the case of an employer that maintains a qualified plan or arrangement which generally excludes employees who have not satisfied the eligibility requirements described in section 410(a)(1)(A) (without regard to section 410(a)(1)(B)), employees who have not yet satisfied such requirements,CommentsClose CommentsPermalink





`(E) employees who are eligible to make salary reduction contributions under an arrangement which meets the requirements of section 403(b), andCommentsClose CommentsPermalink





`(F) all employees of the employer if the employer maintains an arrangement described in section 408(p).CommentsClose CommentsPermalink





`(3) QUALIFIED PLAN OR ARRANGEMENT- The term `qualified plan or arrangement' means a plan, contract, pension, or trust described in section 219(g)(5).CommentsClose CommentsPermalink





`(4) EXCEPTION FOR EMPLOYEES OF GOVERNMENTS AND CHURCHES- The term `applicable employee' shall not include an employee of--CommentsClose CommentsPermalink





`(A) a government or entity described in section 414(d), orCommentsClose CommentsPermalink





`(B) a church or a convention or association of churches which is exempt from tax under section 501, including any employee described in section 414(e)(3)(B).CommentsClose CommentsPermalink





`(5) DESIGNATION OF APPLICABLE EMPLOYEES- The Secretary shall issue guidelines for determining the class or classes of employees to be covered by a payroll deposit IRA arrangement. Such guidelines shall provide that if an employer elects under paragraph (2) to exclude employees from the arrangement, the employer shall specify the classification or categories of employees who are not so covered.CommentsClose CommentsPermalink





`(d) Payroll Deposit IRA Contributions Treated Like Other Contributions to Individual Retirement Plans-CommentsClose CommentsPermalink





`(1) TAX TREATMENT UNAFFECTED- The fact that a contribution to an individual retirement plan is made on behalf of an employee under a payroll deposit IRA arrangement instead of being made directly by the employee shall not affect the deductibility or other tax treatment of the contribution or of other amounts under this title.CommentsClose CommentsPermalink





`(2) PAYROLL SAVINGS CONTRIBUTIONS TAKEN INTO ACCOUNT- Any contribution made on behalf of an employee under a payroll deposit IRA arrangement shall be taken into account in applying the limitations on contributions to individual retirement plans and the other provisions of this title applicable to individual retirement plans as if the contribution had been made directly by the employee.CommentsClose CommentsPermalink





`(e) Exception for Certain Small and New Employers-CommentsClose CommentsPermalink





`(1) IN GENERAL- The requirements of this section shall not apply for any calendar year to an employer if--CommentsClose CommentsPermalink





`(A) the employer did not have more than 10 employees who received at least $5,000 of compensation from the employer for the preceding calendar year, orCommentsClose CommentsPermalink





`(B) was not in existence at all times during the 2 preceding calendar years and did not have more than 100 employees who received at least $5,000 of compensation from the employer on any day during either of the 2 preceding calendar years.CommentsClose CommentsPermalink





`(2) OPERATING RULES- In determining the number of employees for purposes of this subsection--CommentsClose CommentsPermalink





`(A) any rule applicable in determining the number of employees for purposes of section 408(p)(2)(C) shall be applicable under this subsection,CommentsClose CommentsPermalink





`(B) all members of the same family (within the meaning of section 318(a)(1)) shall be treated as 1 individual, andCommentsClose CommentsPermalink





`(C) any reference to an employer shall include a reference to any predecessor employer.CommentsClose CommentsPermalink





`(f) Deposits to Individual Retirement Plans Other Than Those Selected by Employee-CommentsClose CommentsPermalink





`(1) IN GENERAL- An employer shall not be treated as failing to satisfy the requirements of this section or any other provision of this title merely because the employer makes all contributions (or all contributions on behalf of employees who do not specify an individual retirement plan, trustee, or issuer to receive the contributions) to individual retirement plans specified in paragraph (2) or (4).CommentsClose CommentsPermalink





`(2) PLANS OF A DESIGNATED TRUSTEE OR ISSUER- An employer may elect to have contributions for all applicable employees participating in a payroll deposit IRA arrangement made to individual retirement plans of a designated trustee or issuer under the arrangement. The preceding sentence shall not apply unless each participant is notified in writing that the participant's balance may be transferred without cost or penalty to another individual retirement plan established by or on behalf of the participant.CommentsClose CommentsPermalink





`(3) PAYROLL TAX DEPOSIT PROCEDURE- The Secretary, in consultation with the TSP II Board, shall establish a procedure under which an employer--CommentsClose CommentsPermalink





`(A) may include with each deposit of tax required to be deducted and withheld under chapter 24 the aggregate amounts, for the period covered by the deposit, which applicable employees have designated under subsection (b)(1)(A) (or are deemed to have designated under subsection (b)(2)(F)(ii) or under an automatic enrollment arrangement described in subsection (g)) for contribution to individual retirement plans, established on behalf of the employees under paragraph (4), andCommentsClose CommentsPermalink





`(B) specifies, in such manner as the Secretary may prescribe, the following information for each applicable employee for whom a contribution is to be made:CommentsClose CommentsPermalink





`(i) The employee's name and TIN.CommentsClose CommentsPermalink





`(ii) The amount of the contribution.CommentsClose CommentsPermalink





`(iii) The investment options selected by the employee (or deemed to have been selected by the employee under such automatic enrollment arrangement) and the amount of the contribution allocated to each option.CommentsClose CommentsPermalink





`(4) ESTABLISHMENT AND MAINTENANCE OF ACCOUNTS UNDER PAYROLL TAX DEPOSIT PROCEDURE-CommentsClose CommentsPermalink





`(A) IN GENERAL- Subject to the provisions of this section and section 408C, the TSP II Board shall provide for the establishment and maintenance of individual retirement plans (including automatic IRAs) into which contributions may be deposited under paragraph (3). To the maximum extent practicable, the TSP II Board shall--CommentsClose CommentsPermalink





`(i) enter into contracts with persons eligible to be trustees of individual retirement plans under section 408 to establish such plans, to provide the investment funds and investment management, and to provide notice, record keeping, and other administrative services, andCommentsClose CommentsPermalink





`(ii) ensure that the costs of investment management and administration are kept to a minimum, including through consideration of the use of investments which involve passive management and which seek to replicate the performance of a portion of the market.CommentsClose CommentsPermalink





`(B) PAYROLL DEPOSIT FEATURES- The TSP II Board shall establish procedures so that contributions may be made to individual retirement plans (including automatic IRAs) under paragraph (3) without undue administrative or paperwork requirements on participating employers. Such procedures shall ensure that only 1 such plan may be established for each TIN.CommentsClose CommentsPermalink





`(C) LIMITATION ON ROLLOVERS- If--CommentsClose CommentsPermalink





`(i) any amount is paid or distributed out of an individual retirement plan established under this paragraph, andCommentsClose CommentsPermalink





`(ii) such amount is paid into an individual retirement plan which was not established under this paragraph,CommentsClose CommentsPermalink





the payment described in clause (ii) shall be treated as a rollover contribution for purposes of section 408(d)(3) if and only if the balance to the credit of the individual in such individual retirement plan or arrangement immediately before the payment described in clause (i) was at least $15,000.CommentsClose CommentsPermalink





`(g) Coordination With Automatic Enrollment and Other Default Election Provisions-CommentsClose CommentsPermalink





`(1) IN GENERAL- Contributions under a payroll deposit IRA arrangement may be made pursuant to an automatic enrollment arrangement.CommentsClose CommentsPermalink





`(2) AUTOMATIC ENROLLMENT ARRANGEMENT- The term `automatic enrollment arrangement' means an arrangement under a payroll deposit IRA arrangement and subject to rules prescribed by the Secretary--CommentsClose CommentsPermalink





`(A) under which an individual may elect to have the employer make payments as contributions to an individual account plan on behalf of the individual, or to the individual directly in cash,CommentsClose CommentsPermalink





`(B) under which the individual is treated as having elected to have the employer make such contributions in an amount equal to a specified percentage of compensation or dollar amount until the individual specifically elects not to have such contributions made (or specifically elects to have such contributions made at a different percentage or in a different amount), andCommentsClose CommentsPermalink





`(C) which meets notice requirements substantially similar to those described in section 414(w)(4).CommentsClose CommentsPermalink





`(3) DEFAULT INVESTMENTS- If an employee is deemed under an automatic enrollment arrangement to have made an election to participate in a payroll deposit IRA arrangement--CommentsClose CommentsPermalink





`(A) the employee shall be deemed to have made an election to make contributions in the amount specified in paragraph (4),CommentsClose CommentsPermalink





`(B) such contributions shall be transferred to--CommentsClose CommentsPermalink





`(i) an automatic IRA, orCommentsClose CommentsPermalink





`(ii) if the employer has made an election under subsection (f)(2), to an individual retirement plan of the designated trustee or issuer but only if the requirements of subparagraph (C) are met with respect to such individual retirement plan, andCommentsClose CommentsPermalink





`(C) such contributions shall be invested as provided in paragraph (5).CommentsClose CommentsPermalink





`(4) AMOUNT OF CONTRIBUTIONS-CommentsClose CommentsPermalink





`(A) IN GENERAL- The amount specified in this paragraph is 3 percent of compensation.CommentsClose CommentsPermalink





`(B) AUTHORITY OF BOARD TO PROVIDE FOR ANNUAL INCREASES- The TSP II Board may by regulation provide for annual increases in the percentage of compensation an employee is deemed to have elected under paragraph (2) but in no event shall the percentage of compensation an employee is deemed to have elected exceed 8 percent.CommentsClose CommentsPermalink





`(C) CONTRIBUTION LIMIT- The contributions under paragraph (2) on behalf of an employee for any calendar year shall not exceed the dollar limits applicable to the employee for the calendar year under section 219 or 408A.CommentsClose CommentsPermalink





`(5) INVESTMENT IN LIFE CYCLE FUND OR OTHER INVESTMENTS SPECIFIED BY THE BOARD- Amounts contributed under paragraph (3) shall be invested in--CommentsClose CommentsPermalink





`(A) a life cycle fund similar to the life cycle funds offered under the Thrift Savings Fund established under subchapter III of chapter 84 of title 5, United States Code, orCommentsClose CommentsPermalink





`(B) such other investment or investments as the TSP II Board specifies in regulations (which shall be promulgated after taking into account, but not necessarily conforming to, regulations prescribed by the Secretary of Labor under section 404(c)(5) of the Employee Retirement Income Security Act of 1974) and which entails asset allocation and extensive diversification.CommentsClose CommentsPermalink





`(6) COORDINATION WITH WITHHOLDING- The Secretary shall modify the withholding exemption certificate under section 3402(f) so that any notice and election requirements with respect to an automatic enrollment arrangement which is part of a payroll deposit IRA arrangement may be met through the use of such certificate.CommentsClose CommentsPermalink





`(h) Model Notice- The Secretary, in consultation with the TSP II Board, shall--CommentsClose CommentsPermalink





`(1) provide a model notice, written in a manner calculated to be understandable to the average worker, that is simple for employers to use--CommentsClose CommentsPermalink





`(A) to notify employees of the requirement under this section for the employer to provide certain employees with the opportunity to participate in a payroll deposit IRA arrangement, andCommentsClose CommentsPermalink





`(B) to satisfy the requirements of subsection (b)(2)(D),CommentsClose CommentsPermalink





`(2) provide uniform forms for enrollment, including automatic enrollment, in a payroll deposit IRA arrangement, andCommentsClose CommentsPermalink





`(3) establish a web site or other electronic means for small employers to access and use to obtain information on payroll deposit IRA arrangements and to obtain required notices and forms.CommentsClose CommentsPermalink





`(i) Cross Reference- For provision preempting conflicting State laws, see section 2(g) of the Women's Retirement Security Act of 2007.'.CommentsClose CommentsPermalink





(b) Notice of Availability of Investment Guidelines- Section 408(i) (relating to reports) is amended by adding at the end the following new sentence: `Any report furnished under paragraph (2) to an individual shall include notice of the availability of, and methods of acquiring, the basic investment guidelines prepared by the Secretary of Labor.'.CommentsClose CommentsPermalink





(c) Development of Basic Investment Guidelines-CommentsClose CommentsPermalink





(1) IN GENERAL- The Secretary of Labor shall, in consultation with the Secretary of Treasury, develop and publish basic guidelines for investing for retirement. Except as otherwise provided by the Secretary of Labor, such guidelines shall include--CommentsClose CommentsPermalink





(A) information on the benefits of diversification,CommentsClose CommentsPermalink





(B) information on the essential differences, in terms of risk and return, between various pension plan investments, including stocks, bonds, mutual funds, and money market investments,CommentsClose CommentsPermalink





(C) information on how an individual's pension plan investment allocations may differ depending on the individual's age and years to retirement and on other factors determined by the Secretary of Labor,CommentsClose CommentsPermalink





(D) sources of information where individuals may learn more about pension rights, individual investing, and investment advice, andCommentsClose CommentsPermalink





(E) such other information related to individual investing as the Secretary of Labor determines appropriate.CommentsClose CommentsPermalink





(2) CALCULATION INFORMATION- The guidelines under paragraph (1) shall include addresses for Internet sites and worksheets which a participant or beneficiary in a pension plan may use to calculate--CommentsClose CommentsPermalink





(A) the retirement age value of the participant's or beneficiary's nonforfeitable pension benefits under the plan (expressed as an annuity amount and determined by reference to varied historical annual rates of return and annuity interest rates), andCommentsClose CommentsPermalink





(B) other important amounts relating to retirement savings, including the amount which a participant or beneficiary would be required to save annually to provide a retirement income equal to various percentages of their current salary (adjusted for expected growth prior to retirement).CommentsClose CommentsPermalink





(3) PUBLIC COMMENT- The Secretary of Labor shall provide at least 90 days for public comment on proposed guidelines before publishing the final guidelines.CommentsClose CommentsPermalink





(4) RULES RELATING TO GUIDELINES- The guidelines under paragraph (1)--CommentsClose CommentsPermalink





(A) shall be written in a manner calculated to be understood by the average plan participant, andCommentsClose CommentsPermalink





(B) may be delivered in written, electronic, or other appropriate manner to the extent such manner would ensure that the guidelines are reasonably accessible to participants and beneficiaries.CommentsClose CommentsPermalink





(d) Penalty for Failure To Provide Access to Payroll Savings Arrangements- Chapter 43 (relating to qualified pension, etc., plans) is amended by adding at the end the following new section:CommentsClose CommentsPermalink

`SEC. 4980H. REQUIREMENTS FOR EMPLOYERS TO PROVIDE EMPLOYEES ACCESS TO PAYROLL DEPOSIT IRA ARRANGEMENTS.

`(a) General Rule- There is hereby imposed a tax on any failure by an employer to meet the requirements of subsection (d) for a calendar year.CommentsClose CommentsPermalink





`(b) Amount-CommentsClose CommentsPermalink





`(1) IN GENERAL- The amount of the tax imposed by subsection (a) on any failure for any calendar year shall be $100 with respect to each employee to whom such failure relates.CommentsClose CommentsPermalink





`(2) TAX NOT TO APPLY WHERE FAILURE NOT DISCOVERED AND REASONABLE DILIGENCE EXERCISED- No tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that the employer subject to liability for the tax did not know that the failure existed and exercised reasonable diligence to meet the requirements of subsection (d). In no event shall the tax be imposed with respect to any failure that ends before the expiration of 90 days after the employer has responded or has had a reasonable opportunity to respond to a request for confirmation of compliance under subsection (c).CommentsClose CommentsPermalink





`(3) TAX NOT TO APPLY TO FAILURES CORRECTED WITHIN 30 DAYS- No tax shall be imposed by subsection (a) on any failure if--CommentsClose CommentsPermalink





`(A) the employer subject to liability for the tax under subsection (a) exercised reasonable diligence to meet the requirements of subsection (d), andCommentsClose CommentsPermalink





`(B) the employer provides the payroll deposit IRA arrangement described in section 408B to each employee eligible to participate in the arrangement by the end of the 30-day period beginning on the first date the employer knew, or exercising reasonable diligence would have known, that such failure existed.CommentsClose CommentsPermalink





`(4) WAIVER BY SECRETARY- In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive or otherwise inequitable relative to the failure involved.CommentsClose CommentsPermalink





`(c) Procedures for Notice- Not later than 6 months after the date of the enactment of this section, the Secretary shall prescribe and implement procedures for obtaining from employers confirmation that such employers are in compliance with the requirements of subsection (d). The Secretary, in the Secretary's discretion, may prescribe that the confirmation shall be obtained on an annual or less frequent basis, and may use for this purpose the annual report or quarterly report for employment taxes, or such other means as the Secretary may deem advisable.CommentsClose CommentsPermalink





`(d) Requirement To Provide Employee Access to Payroll Deposit IRA Arrangements- The requirements of this subsection are met if the employer meets the requirements of section 408B.'.CommentsClose CommentsPermalink





(e) Coordination With ERISA Fiduciary Duties- Section 404(c)(2) of Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104(c)(2)) is amended--CommentsClose CommentsPermalink





(1) by inserting `or an individual retirement plan designated by the employer under section 408B of such Code' after `1986',CommentsClose CommentsPermalink





(2) by inserting `(7 days after notice has been given to an employee that an individual retirement plan has been established on behalf of the employee under section 408B of such Code)' after `established' in subparagraph (C), andCommentsClose CommentsPermalink





(3) by inserting `or with respect to an individual retirement plan designated by an employer under section 408B of such Code' after `arrangement' in the last sentence.CommentsClose CommentsPermalink





(f) Conforming Amendments-CommentsClose CommentsPermalink





(1) The table of sections for subpart A of part I of subchapter A of chapter 1 is amended by inserting after the item relating to section 408A the following new item:CommentsClose CommentsPermalink





`Sec. 408B. Right to payroll deposit IRA arrangements at work.'.CommentsClose CommentsPermalink





(2) The table of sections for chapter 43 is amended by adding at the end the following new item:CommentsClose CommentsPermalink





`Sec. 4980H. Requirements for employers to provide employees access to payroll deposit IRA arrangements.'.CommentsClose CommentsPermalink





(g) Preemption of Conflicting State Laws- The amendments made by this section shall supersede any law of a State that would directly or indirectly prohibit or restrict the establishment or operation of a payroll deposit IRA arrangement meeting the requirements of section 408B of the Internal Revenue Code of 1986 (including the inclusion in any such arrangement of an automatic enrollment arrangement as defined in section 408B(g) of such Code).CommentsClose CommentsPermalink





(h) Effective Date- The amendments made by this section shall apply to calendar years beginning after December 31, 2008.CommentsClose CommentsPermalink

SEC. 102. CREDIT FOR SMALL EMPLOYERS MAINTAINING PAYROLL DEPOSIT IRA ARRANGEMENTS.

(a) In General- Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by adding at the end the following new section:CommentsClose CommentsPermalink

`SEC. 45O. SMALL EMPLOYER PAYROLL DEPOSIT IRA ARRANGEMENT COSTS.

`(a) General Rule- For purposes of section 38, in the case of an eligible employer maintaining a payroll deposit IRA arrangement meeting the requirements of section 408B (without regard to whether or not the employer is required to maintain the arrangement), the small employer payroll deposit IRA arrangement cost credit determined under this section for any taxable year is the amount determined under subsection (b).CommentsClose CommentsPermalink





`(b) Amount of Credit-CommentsClose CommentsPermalink





`(1) IN GENERAL- The amount of the credit determined under this section for any taxable year with respect to an eligible employer shall be equal to the lesser of--CommentsClose CommentsPermalink





`(A) $25 multiplied by the number of applicable employees (within the meaning of section 408B(c)) for whom contributions are made under the payroll deposit IRA arrangement referred to in subsection (a) for the calendar year in which the taxable year begins, orCommentsClose CommentsPermalink





`(B) $250.CommentsClose CommentsPermalink





`(2) DURATION OF CREDIT- No credit shall be determined under this section for any taxable year other than a taxable year which begins in the first 2 calendar years in which the eligible employer maintains a payroll deposit IRA arrangement meeting the requirements of section 408B.CommentsClose CommentsPermalink





`(3) COORDINATION WITH SMALL EMPLOYER STARTUP CREDIT- No credit shall be allowed under this section for any taxable year if a credit is determined under section 45E for the taxable year.CommentsClose CommentsPermalink





`(c) Eligible Employer- For purposes of this section, the term `eligible employer' means, with respect to any calendar year in which the taxable year begins, an employer which maintains a payroll deposit IRA arrangement meeting the requirements of section 408B and which, on each day during the preceding calendar year, had no more than 100 employees.'.CommentsClose CommentsPermalink





(b) Credit Allowed as Part of General Business Credit- Section 38(b) (defining current year business credit) is amended by striking `plus' at the end of paragraph (30), by striking the period at the end of paragraph (31) and inserting `, plus', and by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(32) in the case of an eligible employer (as defined in section 45O(c)) maintaining a payroll deposit IRA arrangement meeting the requirements of section 408B, the small employer payroll deposit IRA arrangement cost credit determined under section 45O(a).'CommentsClose CommentsPermalink





(c) Clerical Amendment- The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:CommentsClose CommentsPermalink





`Sec. 45O. Small employer payroll deposit IRA arrangement costs.'.CommentsClose CommentsPermalink





(d) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2008.CommentsClose CommentsPermalink

SEC. 103. ESTABLISHMENT OF AUTOMATIC IRAS.

(a) In General- Subpart A of part I of subchapter A of chapter 1 (relating to pension, profit-sharing, stock bonus plans, etc.), as amended by section 101, is amended by inserting after section 408B the following new section:CommentsClose CommentsPermalink

`SEC. 408C. AUTOMATIC IRAS.

`(a) General Rule- An automatic IRA shall be treated for purposes of this title in the same manner as an individual retirement plan. An automatic IRA may also be treated as a Roth IRA for purposes of this title if it meets the requirements of section 408A.CommentsClose CommentsPermalink





`(b) Automatic IRA- For purposes of this section, the term `automatic IRA' means an individual retirement plan (as defined in section 7701(a)(37)) which meets the investment and fee requirements under the regulations under subsection (c).CommentsClose CommentsPermalink





`(c) Investment and Fee Requirements-CommentsClose CommentsPermalink





`(1) IN GENERAL- The TSP II Board, in consultation with the Secretary and the Secretary of Labor, shall, not later than 1 year after the date of the enactment of this section, prescribe regulations which set forth the requirements of this subsection which an individual retirement plan must meet in order to be treated as an automatic IRA.CommentsClose CommentsPermalink





`(2) INVESTMENT OPTIONS- The regulations under paragraph (1) shall provide that an automatic IRA shall allow the individual on whose behalf the individual retirement plan is established to invest contributions to, and earnings of, the plan in all of the following investment options:CommentsClose CommentsPermalink





`(A) Options which are similar to all investment options which are available (at the time the plan is established) to a participant in the Thrift Savings Fund established under subchapter III of chapter 84 of title 5, United States Code.CommentsClose CommentsPermalink





`(B) Any other investment option specified in the regulations.CommentsClose CommentsPermalink





Such regulations shall specify which of the investment options shall be treated as default investment options for purposes of section 408B(g)(5).CommentsClose CommentsPermalink





`(3) INVESTMENT FEES-CommentsClose CommentsPermalink





`(A) IN GENERAL- The regulations under paragraph (1) shall provide that an automatic IRA shall not charge any investment fees which, in the aggregate, are not reasonable (as determined under such regulations).CommentsClose CommentsPermalink





`(B) INVESTMENT FEES- For purposes of this paragraph, the term `investment fees' includes any fee, commission, asset management fee, compensation for services, or any other charge or fee specified in the regulations under paragraph (1) which is imposed with respect to the automatic IRA.'.CommentsClose CommentsPermalink





(b) Studies of Spousal Consent Requirements and Promotion of Certain Lifetime Income Arrangements-CommentsClose CommentsPermalink





(1) IN GENERAL- The Secretary of the Treasury and the Secretary of Labor shall jointly conduct a separate study of the feasibility and desirability of each of the following:CommentsClose CommentsPermalink





(A) Extending to automatic IRAs spousal consent requirements similar to, or based on, those that apply under the Federal employees' Thrift Savings Plan, including consideration of whether modifications of such requirements are necessary to apply them to automatic IRAs.CommentsClose CommentsPermalink





(B) Promoting the use of low-cost annuities, longevity insurance, or other guaranteed lifetime income arrangements in automatic IRAs, including consideration of--CommentsClose CommentsPermalink





(i) appropriate means of arranging for, or encouraging, individuals to receive at least a portion of their distributions in some form of low-cost guaranteed lifetime income, andCommentsClose CommentsPermalink





(ii) issues presented by possible additional differences in, or uniformity of, provisions governing different IRAs.CommentsClose CommentsPermalink





(2) REPORT- Not later than 18 months after the date of the enactment of this Act, the Secretaries shall report the results of each study conducted under subsection (a), together with any recommendations for legislative changes, to the Committees on Finance and Health, Education, Labor, and Pensions of the Senate and the Committees on Ways and Means and Education and Labor of the House of Representatives.CommentsClose CommentsPermalink





(c) Mandatory Transfers- Section 401(a)(31)(B) is amended--CommentsClose CommentsPermalink





(1) by inserting `(including an automatic IRA)' after `individual retirement plan' each place it appears, andCommentsClose CommentsPermalink





(2) by adding at the end the following new sentence: `Any amount so transferred (and any earnings thereon) shall be invested in a default investment described in section 408B(g)(5).'CommentsClose CommentsPermalink





(d) Clerical Amendment- The table of sections for subpart A of part I of subchapter A of chapter 1 is amended by inserting after the item relating to section 408B the following new item:CommentsClose CommentsPermalink





`Sec. 408C. Automatic IRAs.'.CommentsClose CommentsPermalink





(e) Effective Date- The amendments made by this section shall apply to calendar years beginning on or after the date on which proposed and temporary or final regulations described in section 408C(c) of the Internal Revenue Code of 1986 (as added by this Act) are issued.CommentsClose CommentsPermalink

SEC. 104. ESTABLISHMENT OF TSP II BOARD.

(a) Establishment- There is established in the executive branch of the Government a TSP II Board. The board shall be established and maintained in the same manner as the Federal Retirement Thrift Investment Board under subchapter VII of chapter 84 of title 5, United States Code.CommentsClose CommentsPermalink





(b) Executive Director- The TSP II Board shall appoint an Executive Director in a similar manner and with similar functions as the Executive Director of the Federal Retirement Thrift Investment Board under section 8474 of title 5, United States Code.CommentsClose CommentsPermalink





(c) Duties of Board- The TSP II Board shall establish policies and procedures for--CommentsClose CommentsPermalink





(1) establishment and maintenance of individual retirement plans under section 408B(f)(3) of the Internal Revenue Code of 1986,CommentsClose CommentsPermalink





(2) the investment and management of contributions to such individual retirement plans,CommentsClose CommentsPermalink





(3) the amount of contributions, and the investment of such contributions, under automatic contribution arrangements under section 408B(g) of such Code, including the designation of investment funds in which such contributions may be invested, andCommentsClose CommentsPermalink





(4) the establishment of automatic IRAs under section 408C of such Code, including the issuance of regulations under subsection (c) of such section.CommentsClose CommentsPermalink





(d) Best Practices- The TSP II Board shall, on a continual basis, prescribe and encourage best practices (including cost efficiencies and innovations) in enrollment, investment, distribution, and other procedures or arrangements relating to retirement savings and investment. In carrying out its responsibilities under this section, the TSP II Board may implement (by contract or otherwise) pilot projects to help assess the efficacy and workability of specific practices and arrangements.CommentsClose CommentsPermalink





(e) Expansion of Use of IRAs by Self-Employed and Other Individuals- The TSP II Board shall establish procedures to disseminate information (through use of the Internet and other appropriate means) to facilitate and encourage--CommentsClose CommentsPermalink





(1) the use by self-employed and other individuals of automatic debit and similar arrangements for investment in individual retirement plans, including automatic IRAs,CommentsClose CommentsPermalink





(2) efforts by voluntary associations to promote savings in individual retirement plans, including automatic IRAs, by their members and others, andCommentsClose CommentsPermalink





(3) the direct deposit of Federal and State income tax refunds in individual retirement plans, including automatic IRAs.CommentsClose CommentsPermalink





(f) Exclusive Interest- The members of the TSP II Board shall discharge their responsibilities solely in the interest of participants and beneficiaries under individual retirement plans described in section 408B of the Internal Revenue Code of 1986.CommentsClose CommentsPermalink





(g) Other Provisions Made Applicable- The provisions of subsections (f)(3), (g), (i), and (j) of section 8472 of title 5, United States Code, shall apply to the TSP II Board.CommentsClose CommentsPermalink

Subtitle B--Other Provisions

SEC. 111. MODIFICATIONS TO COMPUTATION OF SAVER'S CREDIT; SAVER'S CREDIT MADE REFUNDABLE.

(a) In General- Section 25B(b) (defining applicable percentage), as amended by section 833 of the Pension Protection Act of 2006, is amended to read as follows:CommentsClose CommentsPermalink





`(b) Applicable Percentage- For purposes of this section--CommentsClose CommentsPermalink





`(1) IN GENERAL- The applicable percentage is 50 percent reduced (but not below zero) by 1 percentage point for each phaseout amount by which the taxpayer's adjusted gross income for the taxable year exceeds the threshold amount.CommentsClose CommentsPermalink





`(2) PHASEOUT AMOUNT; THRESHOLD AMOUNT- The phaseout amount and the threshold amount shall be determined as follows:CommentsClose CommentsPermalink

----------------------------------------------------------------------------CommentsClose CommentsPermalink

`In the case of:           The phaseout amount is: The threshold amount is: CommentsClose CommentsPermalink

----------------------------------------------------------------------------CommentsClose CommentsPermalink

A joint return                                $200                  $50,000 CommentsClose CommentsPermalink

A head of household return                    $150                  $37,500 CommentsClose CommentsPermalink

Any other return                              $100                 $25,000. CommentsClose CommentsPermalink

----------------------------------------------------------------------------CommentsClose CommentsPermalink

`(3) INFLATION ADJUSTMENT-CommentsClose CommentsPermalink





`(A) JOINT RETURNS- In the case of any taxable year beginning in a calendar year after 2008, the $50,000 amount under paragraph (2) shall be increased by an amount equal to--CommentsClose CommentsPermalink





`(i) such dollar amount, multiplied byCommentsClose CommentsPermalink





`(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `calendar year 2007' for `calendar year 1992' in subparagraph (B) thereof.CommentsClose CommentsPermalink





Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $500.CommentsClose CommentsPermalink





`(B) OTHER RETURNS- In the case of any taxable year for which there is an increase under subparagraph (A)--CommentsClose CommentsPermalink





`(i) the $37,500 under paragraph (2) shall be increased to an amount equal to 75 percent of the amount determined under subparagraph (A), andCommentsClose CommentsPermalink





`(ii) the $25,000 amount under paragraph (2) shall be increased to an amount equal to 50 percent of the amount determined under subparagraph (A).'.CommentsClose CommentsPermalink





(b) Credit Made Refundable-CommentsClose CommentsPermalink





(1) TRANSFER OF CREDIT TO REFUNDABLE CREDITS-CommentsClose CommentsPermalink





(A) IN GENERAL- Section 25B, as amended by subsection (a), is hereby moved to subpart C of part IV of subchapter A of chapter 1 (relating to refundable credits) and inserted after section 35.CommentsClose CommentsPermalink





(B) CONFORMING AMENDMENTS-CommentsClose CommentsPermalink





(i) Section 24(b)(3)(B) is amended by striking `and 25B'.CommentsClose CommentsPermalink





(ii) Section 25(e)(1)(C)(ii) is amended by striking `, 25B'.CommentsClose CommentsPermalink





(iii) Section 25D(c)(2) is amended by striking `24, and 25B' and inserting `and 24'.CommentsClose CommentsPermalink





(iv) Section 26(a)(1) is amended by striking `24, and 25B' and inserting `and 24'.CommentsClose CommentsPermalink





(v) Section 25B, as moved by subparagraph (A), is redesignated as section 36.CommentsClose CommentsPermalink





(vi) Section 904(i) is amended by striking `24, and 25B' and inserting ` and 24'.CommentsClose CommentsPermalink





(vii) Section 1400C(d)(2) is amended by striking `, 25B'.CommentsClose CommentsPermalink





(viii) The table of sections for subpart C of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 36 and inserting the following:CommentsClose CommentsPermalink





`Sec. 36. Elective deferrals and IRA contributions by certain individuals.CommentsClose CommentsPermalink





`Sec. 37. Overpayments of tax.'.CommentsClose CommentsPermalink





(ix) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 25B.CommentsClose CommentsPermalink





(x) Section 1324 of title 31, United States Code, is amended by inserting `, or enacted by the Women's Retirement Security Act of 2007' before the period at the end.CommentsClose CommentsPermalink





(2) MANDATORY DEPOSIT INTO QUALIFIED ACCOUNT-CommentsClose CommentsPermalink





(A) NO REDUCTION OF TAX- Subsection (a) of section 36, as moved and redesignated by paragraph (1), is amended by striking `credit against the tax imposed by this subtitle' and inserting `tax credit'.CommentsClose CommentsPermalink





(B) DEPOSIT INTO QUALIFIED ACCOUNT- Subsection (g) of section 36, as moved and redesignated by paragraph (1), is amended to read as follows:CommentsClose CommentsPermalink





`(g) Deposit Into Qualified Account-CommentsClose CommentsPermalink





`(1) IN GENERAL- Any amount allowed as a tax credit under subsection (a) shall not be allowed as a credit against any tax imposed by this subtitle but instead shall be treated as an overpayment under section 6401(b) and--CommentsClose CommentsPermalink





`(A) shall be paid on behalf of the individual taxpayer to an applicable retirement plan designated by the individual to be invested in a manner designated by the individual, except that in the case of a joint return, each spouse shall be entitled to designate an applicable retirement plan and investments with respect to payments attributable to such spouse, orCommentsClose CommentsPermalink





`(B) in the case of taxpayer who does not properly designate an applicable retirement plan in a timely manner or who designates an applicable retirement plan that does not accept such amount in a timely manner, shall be paid or credited on behalf of the individual taxpayer in a manner determined under rules prescribed by the Secretary that provides treatment comparable to the treatment under subparagraph (A).CommentsClose CommentsPermalink





`(2) APPLICABLE RETIREMENT PLAN- For purposes of this subsection, the term `applicable retirement plan' means a plan that elects to accept deposits under this subsection and that is described in clause (iii), (iv), (v), or (vi) of section 402(c)(8)(B) or in section 408A(b).CommentsClose CommentsPermalink





`(3) TREATMENT OF DIRECT PAYMENTS- All amounts paid under this subsection shall be treated for purposes of this title as income attributable to--CommentsClose CommentsPermalink





`(A) a Roth IRA contribution in the case of a payments to an individual retirement plan, orCommentsClose CommentsPermalink





`(B) a designated Roth contribution in the case of a payment to an applicable retirement plan described in section 402A(e).'.CommentsClose CommentsPermalink





(c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2007.CommentsClose CommentsPermalink

SEC. 112. QUALIFIED CASH OR DEFERRED ARRANGEMENTS MUST ALLOW LONG-TERM EMPLOYEES WORKING MORE THAN 500 BUT LESS THAN 1,000 HOURS PER YEAR TO PARTICIPATE.

(a) Participation Requirement-CommentsClose CommentsPermalink





(1) IN GENERAL- Subparagraph (D) of section 401(k)(2) (defining qualified cash or deferred arrangement) is amended to read as follows:CommentsClose CommentsPermalink





`(D) which does not require, as a condition of participation in the arrangement, that an employee complete a period of service with the employer (or employers) maintaining the plan extending beyond the close of the earlier of--CommentsClose CommentsPermalink





`(i) the period permitted under section 410(a)(1) (determined without regard to subparagraph (B)(i) thereof), orCommentsClose CommentsPermalink





`(ii) subject to the provisions of paragraph (14), the first period of 3 consecutive 12-month periods during each of which the employee has at least 500 hours of service.'.CommentsClose CommentsPermalink





(2) SPECIAL RULES- Section 401(k) (relating to cash or deferred arrangements), as amended by section 902 of the Pension Protection Act of 2006, is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(14) SPECIAL RULES FOR PARTICIPATION REQUIREMENT FOR LONG-TERM, PART-TIME WORKERS- For purposes of paragraph (2)(D)(ii)--CommentsClose CommentsPermalink





`(A) AGE REQUIREMENT MUST BE MET- Paragraph (2)(D)(ii) shall not apply to an employee unless the employee has met the requirement of section 410(a)(1)(A)(i) by the close of the last of the 12-month periods described in such paragraph.CommentsClose CommentsPermalink





`(B) NONDISCRIMINATION AND TOP-HEAVY RULES NOT TO APPLY-CommentsClose CommentsPermalink





`(i) NONDISCRIMINATION RULES- In the case of employees who are eligible to participate in the arrangement solely by reason of paragraph (2)(D)(ii)--CommentsClose CommentsPermalink





`(I) notwithstanding subsection (a)(4), an employer shall not be required to make nonelective or matching contributions on behalf of such employees even if such contributions are made on behalf of other employees eligible to participate in the arrangement, andCommentsClose CommentsPermalink





`(II) an employer may elect to exclude such employees from the application of paragraph (3) and subsection (m)(2).CommentsClose CommentsPermalink





`(ii) TOP-HEAVY RULES- An employer may elect to exclude all employees who are eligible to participate in a plan maintained by the employer solely by reason of paragraph (2)(D)(ii) from--CommentsClose CommentsPermalink





`(I) the determination of whether the plan is a top-heavy plan under section 416, andCommentsClose CommentsPermalink





`(II) if the plan is a top-heavy plan under such section, the application of the vesting and benefit requirements under subsections (b) and (c) of such section.CommentsClose CommentsPermalink





`(iii) VESTING- For purposes of determining whether an employee described in clause (i) has a nonforfeitable right to employer contributions (other than contributions described in paragraph (3)(D)(i)) under the arrangement, each 12-month period for which the employee has at least 500 hours of service shall be treated as a year of service.CommentsClose CommentsPermalink





`(iv) EMPLOYEES WHO BECOME FULL-TIME EMPLOYEES- This subparagraph shall cease to apply to any employee after the date on which the employee meets the requirements of section 410(a)(1)(A)(ii) without regard to paragraph (2)(D)(ii).CommentsClose CommentsPermalink





`(C) EXCEPTION FOR EMPLOYEES UNDER COLLECTIVELY BARGAINED PLANS, ETC- Paragraph (2)(D)(ii) shall not apply to employees described in section 410(b)(3).CommentsClose CommentsPermalink





`(D) SPECIAL RULES-CommentsClose CommentsPermalink





`(i) TIME OF PARTICIPATION- The rules of section 410(a)(4) shall apply to an employee eligible to participate in an arrangement solely by reason of paragraph (2)(D)(ii).CommentsClose CommentsPermalink





`(ii) 12-month PERIODS- 12-month periods shall be determined in the same manner as under the last sentence of section 410(a)(3)(A).'.CommentsClose CommentsPermalink





(b) Effective Date- The amendments made by this section shall apply to plan years beginning after December 31, 2008, except that, for purposes of section 401(k)(2)(D)(ii) of the Internal Revenue Code of 1986 (as added by such amendments), 12-month periods beginning before January 1, 2009, shall not be taken into account.CommentsClose CommentsPermalink

SEC. 113. TRANSFERS OF UNUSED BENEFITS OF HEALTH FLEXIBLE SPENDING ARRANGEMENT TO CERTAIN RETIREMENT PLANS.

(a) In General- Section 125 (relating to cafeteria plans) is amended by redesignating subsections (h) and (i) as subsections (i) and (j), respectively, and by inserting after subsection (g) the following:CommentsClose CommentsPermalink





`(h) Contributions of Certain Unused Health Benefits-CommentsClose CommentsPermalink





`(1) IN GENERAL- For purposes of this title, a plan or other arrangement shall not fail to be treated as a cafeteria plan solely because qualified benefits of a participant under such plan include a health flexible spending arrangement under which not more than $500 of unused health benefits may be contributed on behalf of the participant to--CommentsClose CommentsPermalink





`(A) a qualified retirement plan (as defined in section 4974(c)), orCommentsClose CommentsPermalink





`(B) an eligible deferred compensation plan (as defined in section 457(b)) maintained by an eligible employer described in section 457(e)(1)(A).CommentsClose CommentsPermalink





`(2) TREATMENT OF CONTRIBUTION OF UNUSED HEALTH BENEFITS-CommentsClose CommentsPermalink





`(A) IN GENERAL- For purposes of this title, contributions described in paragraph (1) shall be treated as elective contributions made pursuant to an election by the participant between such contributions and compensation which would otherwise be includible in the gross income of the employee.CommentsClose CommentsPermalink





`(B) EXCLUSION OR DEDUCTION- Contributions described in paragraph (1) shall be excluded from gross income, or included in gross income and allowed as a deduction, to the same extent that elective contributions would be so treated under this title.CommentsClose CommentsPermalink





`(3) HEALTH FLEXIBLE SPENDING ARRANGEMENT- For purposes of this subsection, the term `health flexible spending arrangement' means a flexible spending arrangement (as defined in section 106(c)) which is a qualified benefit and only permits reimbursement for expenses for medical care (as defined in section 213(d)(1) without regard to subparagraphs (C) and (D) thereof).CommentsClose CommentsPermalink





`(4) UNUSED HEALTH BENEFITS- For purposes of this subsection, the term `unused health benefits' means, with respect to a participant, the excess of--CommentsClose CommentsPermalink





`(A) the maximum amount of reimbursement allowable to the participant with respect to a plan year under a health flexible spending arrangement, taking into account any election by the participant, overCommentsClose CommentsPermalink





`(B) the actual amount of reimbursement with respect to such year under such arrangement.'.CommentsClose CommentsPermalink





(b) Special Rules- The Secretary of the Treasury shall prescribe such rules as are appropriate to carry out the purposes of the amendments made by this section. Such rules may permit elections by plan sponsors with respect to the year to which the contributions relate and may provide for special treatment for purposes of applying the requirements applicable to such contributions.CommentsClose CommentsPermalink





(c) Effective Date- The amendment made by subsection (a) shall apply to years beginning after December 31, 2007.CommentsClose CommentsPermalink

SEC. 114. COMPUTATION OF LIMITS ON IRA AND ROTH IRA CONTRIBUTIONS.

(a) Certain Wage Replacement Income Treated as Compensation-CommentsClose CommentsPermalink





(1) WAGE REPLACEMENT INCOME- Section 219(f) (relating to other definitions and special rules) is amended by redesignating paragraph (8) as paragraph (9) and by inserting after paragraph (7) the following new paragraph:CommentsClose CommentsPermalink





`(8) TREATMENT OF CERTAIN WAGE REPLACEMENT INCOME AS COMPENSATION-CommentsClose CommentsPermalink





`(A) IN GENERAL- Notwithstanding paragraph (1), applicable wage replacement income not otherwise treated as compensation shall be treated as compensation for purposes of this section.CommentsClose CommentsPermalink





`(B) APPLICABLE WAGE REPLACEMENT INCOME- For purposes of this paragraph, the term `applicable wage replacement income' means any amount received by an individual--CommentsClose CommentsPermalink





`(i) as the result of the individual having become disabled,CommentsClose CommentsPermalink





`(ii) as unemployment compensation (as defined in section 85(b)),CommentsClose CommentsPermalink





`(iii) under workmen's compensation acts, orCommentsClose CommentsPermalink





`(iv) which constitutes wage replacement income under regulations prescribed by the Secretary.'.CommentsClose CommentsPermalink





(2) CERTAIN EXCLUDABLE AMOUNTS MAY BE TAKEN INTO ACCOUNT FOR PURPOSES OF ROTH IRAS- Section 408A(c)(2) (relating to contribution limit) is amended by adding at the end the following new flush sentence:CommentsClose CommentsPermalink





`In determining the maximum amount under subparagraph (A), subsections (b)(1)(B) and (c) of section 219 shall be applied by taking into account compensation described in section 219(f)(8) without regard to whether it is includible in gross income.'.CommentsClose CommentsPermalink





(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to taxable years beginning after December 31, 2007.CommentsClose CommentsPermalink





(b) Computation of Maximum IRA Deduction for Roth IRAs Using Compensation From 2 Preceding Taxable Years-CommentsClose CommentsPermalink





(1) IN GENERAL- Section 408A(c) (relating to treatment of contributions) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(8) COMPENSATION FROM PRECEDING 2 YEARS MAY BE TAKEN INTO ACCOUNT-CommentsClose CommentsPermalink





`(A) IN GENERAL- A taxpayer may elect for purposes of paragraph (2) to take into account any unused compensation from the 2 taxable years immediately preceding the taxable year.CommentsClose CommentsPermalink





`(B) UNUSED COMPENSATION- For purposes of this paragraph, the term `unused compensation' means with respect to an individual for any taxable year the compensation includible in the individual's gross income for the taxable year reduced by the sum of--CommentsClose CommentsPermalink





`(i) the amount allowed as a deduction under 219(a) to such individual for such taxable year,CommentsClose CommentsPermalink





`(ii) the amount of any designated nondeductible contribution (as defined in section 408(o)) on behalf of such individual for such taxable year,CommentsClose CommentsPermalink





`(iii) the amount of any contribution on behalf of such individual to a Roth IRA under this section for such taxable year, andCommentsClose CommentsPermalink





`(iv) the amount of compensation includible in such individual's gross income for such taxable year taken into account under section 219(c) in determining the limitation under section 219 or paragraph (2) for the individual's spouse.CommentsClose CommentsPermalink





`(C) APPLICATION TO SPECIAL RULE FOR MARRIED INDIVIDUALS- Under rules prescribed by the Secretary, in applying section 219(c) for any taxable year for purposes of applying paragraph (2)(A), unused compensation of an individual or an individual's spouse for the 2 taxable years immediately preceding the taxable year may be taken into account.'.CommentsClose CommentsPermalink





(2) EFFECTIVE DATE- The amendment made by this subsection shall apply to taxable years beginning after December 31, 2007, but unused compensation for taxable years beginning before January 1, 2008, may be taken into account for taxable years beginning after December 31, 2007.CommentsClose CommentsPermalink

TITLE II--PROVISIONS PROVIDING FOR PRESERVATION OF INCOME

SEC. 201. EXCLUSION OF CERTAIN QUALIFIED ANNUITY PAYMENTS.

(a) Exclusion-CommentsClose CommentsPermalink





(1) QUALIFIED PLANS- Section 402(e) (relating to exempt trusts) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(7) EXCLUSION OF PERCENTAGE OF LIFETIME ANNUITY PAYMENTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- In the case of a lifetime annuity payment to a qualified distributee from a qualified trust (within the meaning of subsection (c)(8)(A)) maintained in connection with a defined contribution plan, gross income shall not include 10 percent of the amount otherwise includible in gross income (determined without regard to this paragraph). For purposes of this paragraph, payments from an annuity contract distributed by the qualified trust shall be treated as payments from the qualified trust.CommentsClose CommentsPermalink





`(B) LIMITATION-CommentsClose CommentsPermalink





`(i) IN GENERAL- If--CommentsClose CommentsPermalink





`(I) the aggregate amount of lifetime annuity payments to the distributee during the taxable year which are includible in gross income (determined without regard to this paragraph) and which are subject to this paragraph or to rules similar to the rules of this paragraph (other than section 72(b)(5) or 101(d)(4)), exceedsCommentsClose CommentsPermalink





`(II) 50 percent of the applicable amount for the taxable year under section 415(a),CommentsClose CommentsPermalink





then the aggregate amount otherwise excludable under subparagraph (A) for the taxable year shall be reduced by 10 percent of the portion of such excess which is allocable under clause (ii) to payments which are subject to this paragraph.CommentsClose CommentsPermalink





`(ii) ALLOCATION RULE- Any excess described in clause (i) for any taxable year shall be allocated ratably among all lifetime annuity payments to the qualified distributee described in clause (i)(I).CommentsClose CommentsPermalink





`(C) DEFINITIONS- For purposes of this paragraph--CommentsClose CommentsPermalink





`(i) LIFETIME ANNUITY PAYMENT-CommentsClose CommentsPermalink





`(I) IN GENERAL- Except as provided in this clause, the term `lifetime annuity payment' means a distribution from an annuity contract which is a part of a series of substantially equal periodic payments (not less frequently than annually) made over the life of the qualified distributee or the joint lives of the qualified distributee and the qualified distributee's designated beneficiary. For purposes of this paragraph, the term `annuity contract' means a commercial annuity (as defined in section 3405(e)(6)), other than an endowment or life insurance contract.CommentsClose CommentsPermalink





`(II) CERTAIN FLUCTUATING PAYMENTS- Annuity payments shall not fail to be treated as part of a series of substantially equal periodic payments merely because the amount of the periodic payments may vary in accordance with investment experience, reallocations among investment options, actuarial gains or losses, cost of living indices, a constant percentage (not less than zero) applied not less frequently than annually, or similar fluctuating criteria.CommentsClose CommentsPermalink





`(III) CERTAIN CHANGES IN THE MODE OF PAYMENT- Annuity payments shall not fail to be treated as part of a series of substantially equal periodic payments merely because the period between each such payment is lengthened or shortened, but only if at all times such period is not longer than 1 year.CommentsClose CommentsPermalink





`(IV) PERMITTED REDUCTIONS- Annuity payments shall not fail to be treated as part of a series of substantially equal periodic payments merely because, in the case of an annuity payable over the lives of the qualified distributee and the qualified distributee's designated beneficiary, the amounts paid after the death of the qualified distributee or the qualified distributee's designated beneficiary are less than the amounts payable during their joint lives.CommentsClose CommentsPermalink





`(V) CERTAIN CONTRACT BENEFITS- The availability of a commutation benefit or other feature permitting acceleration of annuity payments (or a modification of the period during which such a benefit is available), a minimum period of payments or a minimum amount to be paid in any event shall not affect the treatment of a distribution as a lifetime annuity payment.CommentsClose CommentsPermalink





`(VI) TRUST PAYMENTS- In the case of lifetime annuity payments being made to a qualified trust, payments by the qualified trust to a qualified distributee of the entire amount received by the qualified trust with respect to the qualified distributee shall constitute lifetime annuity payments if such payments are made within a reasonable period after receipt by the qualified trust.CommentsClose CommentsPermalink





`(VII) QUALIFIED DOMESTIC RELATIONS ORDERS- Annuity payments shall not fail to be treated as a series of substantially equal periodic payments merely because the payments are reduced on account of a qualified domestic relations order (within the meaning of section 414(p)) that becomes effective after the commencement of the annuity payments.CommentsClose CommentsPermalink





`(ii) QUALIFIED DISTRIBUTEE- The term `qualified distributee' means the employee, the surviving spouse of the employee, and an alternate payee who is the spouse or former spouse of the employee.CommentsClose CommentsPermalink





`(D) RECAPTURE TAX-CommentsClose CommentsPermalink





`(i) IN GENERAL- If--CommentsClose CommentsPermalink





`(I) an amount is not includible in gross income by reason of subparagraph (A), andCommentsClose CommentsPermalink





`(II) the series of payments of which such payment is a part is subsequently modified (other than by reason of death or disability) so that some or all future payments are not lifetime annuity payments,CommentsClose CommentsPermalink





the qualified distributee's gross income for the first taxable year in which such modification occurs shall be increased by an amount, determined under rules prescribed by the Secretary, equal to the amount which (but for subparagraph (A)) would have been includible in the qualified distributee's gross income if the modification had been in effect at all times, plus interest for the deferral period at the underpayment rate established under section 6621.CommentsClose CommentsPermalink





`(ii) DEFERRAL PERIOD- For purposes of this subparagraph, the term `deferral period' means, with respect to any amount, the period beginning with the taxable year in which (without regard to subparagraph (A)) the amount would have been includible in gross income and ending with the taxable year in which the modification described in clause (i)(II) occurs.CommentsClose CommentsPermalink





`(E) INVESTMENT IN THE CONTRACT- For purposes of section 72, the investment in the contract shall be determined without regard to this paragraph.'.CommentsClose CommentsPermalink





(2) QUALIFIED ANNUITY PLANS- Section 403(a) (relating to qualified annuity plans) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(6) EXCLUSION OF PERCENTAGE OF LIFETIME ANNUITY PAYMENTS- Rules similar to the rules of section 402(e)(7) shall apply to distributions under any annuity contract to which this subsection applies.'.CommentsClose CommentsPermalink





(3) PURCHASED ANNUITIES- Section 403(b) (relating to purchased annuities) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(14) EXCLUSION OF PERCENTAGE OF LIFETIME ANNUITY PAYMENTS- Rules similar to the rules of section 402(e)(7) shall apply to distributions under any annuity contract or custodial account to which this subsection applies.'.CommentsClose CommentsPermalink





(4) IRAS- Section 408(d) (relating to tax treatment of distributions), as amended by section 1201 of the Pension Protection Act of 2006, is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(10) EXCLUSION OF PERCENTAGE OF LIFETIME ANNUITY PAYMENTS- Rules similar to the rules of section 402(e)(7) shall apply to distributions out of an individual retirement plan.'.CommentsClose CommentsPermalink





(5) SECTION 457 PLANS- Section 457(e) (relating to special rules for deferred compensation plans) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(19) EXCLUSION OF PERCENTAGE OF LIFETIME ANNUITY PAYMENTS- Rules similar to the rules of section 402(e)(7) shall apply to distributions from an eligible deferred compensation plan of an eligible employer described in subsection (e)(1)(A).'.CommentsClose CommentsPermalink





(b) Effective Date- The amendments made by this section shall apply to distributions made after December 31, 2007.CommentsClose CommentsPermalink

SEC. 202. EXCLUSION FOR LIFETIME ANNUITY PAYMENTS.

(a) Lifetime Annuity Payments Under Annuity Contracts- Section 72(b) (relating to exclusion ratio) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(5) EXCLUSION FOR LIFETIME ANNUITY PAYMENTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- In the case of lifetime annuity payments received as an annuity under 1 or more annuity contracts in any taxable year, gross income shall not include the lesser of--CommentsClose CommentsPermalink





`(i) 50 percent of the portion of the lifetime annuity payments which (without regard to this paragraph) is includible in gross income under this section for the taxable year, orCommentsClose CommentsPermalink





`(ii) $20,000.CommentsClose CommentsPermalink





`(B) COST-OF-LIVING ADJUSTMENT- In the case of taxable years beginning after December 31, 2008, the $20,000 amount in subparagraph (A)(ii) shall be increased by an amount equal to--CommentsClose CommentsPermalink





`(i) such dollar amount, multiplied byCommentsClose CommentsPermalink





`(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `calendar year 2007' for `calendar year 1992' in subparagraph (B) thereof.CommentsClose CommentsPermalink





If any amount as increased under the preceding sentence is not a multiple of $500, such amount shall be rounded to the next lower multiple of $500.CommentsClose CommentsPermalink





`(C) APPLICATION OF PARAGRAPH- Subparagraph (A) shall not apply to--CommentsClose CommentsPermalink





`(i) any amount received under an eligible deferred compensation plan (as defined in section 457(b)) or under a qualified retirement plan (as defined in section 4974(c)),CommentsClose CommentsPermalink





`(ii) any amount paid under an annuity contract which is received by the beneficiary under the contract--CommentsClose CommentsPermalink





`(I) after the death of the annuitant in the case of payments described in subsection (c)(5)(A)(ii)(III), unless the beneficiary is the surviving spouse of the annuitant, orCommentsClose CommentsPermalink





`(II) after the death of the annuitant and joint annuitant in the case of payments described in subsection (c)(5)(A)(ii)(IV), unless the beneficiary is the surviving spouse of the last to die of the annuitant and the joint annuitant, orCommentsClose CommentsPermalink





`(iii) any annuity contract that is a qualified funding asset (as defined in section 130(d)), but without regard to whether there is a qualified assignment.CommentsClose CommentsPermalink





`(D) INVESTMENT IN THE CONTRACT- For purposes of this section, the investment in the contract shall be determined without regard to this paragraph.'.CommentsClose CommentsPermalink





(b) Definitions- Section 72(c) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(5) LIFETIME ANNUITY PAYMENT-CommentsClose CommentsPermalink





`(A) IN GENERAL- For purposes of subsection (b)(5), the term `lifetime annuity payment' means any amount received as an annuity under any portion of an annuity contract, but only if--CommentsClose CommentsPermalink





`(i) the only person (or persons in the case of payments described in subclause (II) or (IV) of clause (ii)) legally entitled (by operation of the contract, a trust, or other legally enforceable means) to receive such amount during the life of the annuitant or joint annuitant is such annuitant or joint annuitant, andCommentsClose CommentsPermalink





`(ii) such amount is part of a series of substantially equal periodic payments made not less frequently than annually over--CommentsClose CommentsPermalink





`(I) the life of the annuitant,CommentsClose CommentsPermalink





`(II) the lives of the annuitant and a joint annuitant, but only if the annuitant is the spouse of the joint annuitant as of the annuity starting date or the difference in age between the annuitant and joint annuitant is 15 years or less,CommentsClose CommentsPermalink





`(III) the life of the annuitant with a minimum period of payments or with a minimum amount that must be paid in any event, orCommentsClose CommentsPermalink





`(IV) the lives of the annuitant and a joint annuitant with a minimum period of payments or with a minimum amount that must be paid in any event, but only if the annuitant is the spouse of the joint annuitant as of the annuity starting date or the difference in age between the annuitant and joint annuitant is 15 years or less.CommentsClose CommentsPermalink





`(iii) EXCEPTIONS- For purposes of clause (ii), annuity payments shall not fail to be treated as part of a series of substantially equal periodic payments--CommentsClose CommentsPermalink





`(I) because the amount of the periodic payments may vary in accordance with investment experience, reallocations among investment options, actuarial gains or losses, cost-of-living indices, a constant percentage (not less than zero) applied not less frequently than annually, or similar fluctuating criteria,CommentsClose CommentsPermalink





`(II) due to the existence of, or modification of the duration of, a provision in the contract permitting a lump-sum withdrawal after the annuity starting date, orCommentsClose CommentsPermalink





`(III) because the period between each such payment is lengthened or shortened, but only if at all times such period is no longer than 1 calendar year.CommentsClose CommentsPermalink





`(B) ANNUITY CONTRACT- For purposes of subparagraph (A) and subsections (b)(5) and (x), the term `annuity contract' means a commercial annuity (as defined by section 3405(e)(6)), other than an endowment or life insurance contract.CommentsClose CommentsPermalink





`(C) MINIMUM PERIOD OF PAYMENTS- For purposes of subparagraph (A), the minimum period of payments is a guaranteed term of payments which does not exceed the greater of--CommentsClose CommentsPermalink





`(i) 10 years, orCommentsClose CommentsPermalink





`(ii) the life expectancy of--CommentsClose CommentsPermalink





`(I) the annuitant as of the annuity starting date, in the case of lifetime annuity payments described in subparagraph (A)(ii)(III), orCommentsClose CommentsPermalink





`(II) the annuitant and joint annuitant as of the annuity starting date, in the case of lifetime annuity payments described in subparagraph (A)(ii)(IV).CommentsClose CommentsPermalink





For purposes of this subparagraph, life expectancy shall be computed with reference to the tables prescribed by the Secretary under paragraph (3). For purposes of subsection (x)(1)(C)(ii), the permissible minimum period of payments shall be determined as of the annuity starting date and reduced by one for each subsequent year.CommentsClose CommentsPermalink





`(D) MINIMUM AMOUNT THAT MUST BE PAID IN ANY EVENT- For purposes of subparagraph (A), the minimum amount that must be paid in any event is an amount payable to the designated beneficiary under an annuity contract which is in the nature of a refund and does not exceed the greater of the amount applied to produce the lifetime annuity payments under the contract or the amount, if any, available for withdrawal under the contract on the date of death.'.CommentsClose CommentsPermalink





(c) Recapture Tax for Lifetime Annuity Payments- Section 72 is amended by redesignating subsection (x) as subsection (y) and by inserting after subsection (x) the following new subsection:CommentsClose CommentsPermalink





`(x) Recapture Tax for Modifications To or Reductions In Lifetime Annuity Payments-CommentsClose CommentsPermalink





`(1) IN GENERAL- If--CommentsClose CommentsPermalink





`(A) any amount received under an annuity contract is excluded from income by reason of subsection (b)(5) (relating to lifetime annuity payments) for any taxable year, andCommentsClose CommentsPermalink





`(B) a recapture event described in paragraph (2) occurs in any subsequent taxable year,CommentsClose CommentsPermalink





then gross income for the first taxable year in which the recapture event occurs shall be increased by the recapture amount.CommentsClose CommentsPermalink





`(2) RECAPTURE EVENT- For purposes of paragraph (1), a recapture event occurs if--CommentsClose CommentsPermalink





`(A) the series of payments under an annuity contract is subsequently modified so any future payments are not lifetime annuity payments,CommentsClose CommentsPermalink





`(B) after the date of receipt of the first lifetime annuity payment under the contract an annuitant receives a lump sum and thereafter is to receive annuity payments in a reduced amount under the contract, orCommentsClose CommentsPermalink





`(C) after the date of receipt of the first lifetime annuity payment under the contract the dollar amount of any subsequent annuity payment is reduced and a lump sum is not paid in connection with the reduction, unless such reduction is--CommentsClose CommentsPermalink





`(i) due to an event described in subsection (c)(5)(A)(iii), orCommentsClose CommentsPermalink





`(ii) due to the addition of, or increase in, a minimum period of payments (within the meaning of subsection (c)(5)(C)) or a minimum amount that must be paid in any event (within the meaning of subsection (c)(5)(D)).CommentsClose CommentsPermalink





`(3) RECAPTURE AMOUNT-CommentsClose CommentsPermalink





`(A) IN GENERAL- For purposes of this subsection, the recapture amount shall be the amount, determined under rules prescribed by the Secretary, equal to the amount which (but for subsection (b)(5)) would have been includible in the taxpayer's gross income if the modification or reduction described in subparagraph (A), (B), or (C) of paragraph (2) had been in effect at all times, plus interest for the deferral period at the underpayment rate established by section 6621.CommentsClose CommentsPermalink





`(B) DEFERRAL PERIOD- For purposes of this subsection, the term `deferral period' means, with respect to any amount, the period beginning with the taxable year in which (without regard to subsection (b)(5)) the amount would have been includible in gross income and ending with the taxable year in which the modification or reduction described in subparagraph (A), (B), or (C) of paragraph (2) occurs.CommentsClose CommentsPermalink





`(4) EXCEPTIONS TO RECAPTURE TAX- Paragraph (1) shall not apply in the case of any recapture event which occurs because an annuitant--CommentsClose CommentsPermalink





`(A) dies or becomes disabled (within the meaning of subsection (m)(7)),CommentsClose CommentsPermalink





`(B) becomes a chronically ill individual within the meaning of section 7702B(c)(2), orCommentsClose CommentsPermalink





`(C) encounters hardship.'.CommentsClose CommentsPermalink





(d) Lifetime Distributions of Life Insurance Death Benefits-CommentsClose CommentsPermalink





(1) IN GENERAL- Section 101(d) (relating to payment of life insurance proceeds at a date later than death) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(4) EXCLUSION FOR LIFETIME ANNUITY PAYMENTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- In the case of amounts to which this subsection applies, gross income for any taxable year shall not include the lesser of--CommentsClose CommentsPermalink





`(i) 50 percent of the portion of lifetime annuity payments which (without regard to this paragraph) is includible in gross income under this section, orCommentsClose CommentsPermalink





`(ii) the amount in effect under section 72(b)(5)(A)(ii) for the taxable year.CommentsClose CommentsPermalink





`(B) RULES OF SECTION 72(b)(5) TO APPLY- For purposes of this paragraph, rules similar to the rules of section 72(b)(5) and section 72(x) shall apply, except that the term `beneficiary of the life insurance contract' shall be substituted for the term `annuitant' each place it appears, and the term `life insurance contract' shall be substituted for the term `annuity contract' each place it appears.'.CommentsClose CommentsPermalink





(2) CONFORMING AMENDMENT- Section 101(d)(1) is amended by inserting `or paragraph (4)' after `to the extent not excluded by the preceding sentence'.CommentsClose CommentsPermalink





(e) Effective Date-CommentsClose CommentsPermalink





(1) IN GENERAL- The amendments made by this section shall apply to amounts received in calendar years beginning after the date of the enactment of this Act.CommentsClose CommentsPermalink





(2) SPECIAL RULE FOR EXISTING CONTRACTS- In the case of a contract in force on the date of the enactment of this Act that does not satisfy the requirements of section 72(c)(5)(A) of the Internal Revenue Code of 1986 (as added by this section), or requirements similar to such section 72(c)(5)(A) in the case of a life insurance contract, any modification to such contract (including a change in ownership) or to the payments under such contract that is made to satisfy the requirements of such section (or similar requirements) shall not result in the recognition of any gain or loss, any amount being included in gross income, or any addition to tax that otherwise might result from such modification, but only if the modification is completed before the date which is 2 years after the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 203. JOINT STUDY OF APPLICATION OF SPOUSAL CONSENT RULES TO DEFINED CONTRIBUTION PLANS.

(a) Study- The Secretary of Labor and the Secretary of the Treasury shall jointly conduct a study of the feasibility and desirability of extending the application of the requirements of section 205 of the Employee Retirement Income Security Act of 1974 and sections 401(a)(11) and 417 of the Internal Revenue Code of 1986 (relating to spousal consent requirements) to defined contribution plans to which such requirements do not apply. Such study shall include consideration of any modifications of such requirements that are necessary to apply such requirements to such plans.CommentsClose CommentsPermalink





(b) Report- Not later than 2 years after the date of the enactment of this Act, the Secretaries shall report the results of the study, together with any recommendations for legislative changes, to the Committees on Finance and Health, Education, Labor, and Pensions of the Senate and the Committees on Ways and Means and Education and Labor of the House of Representatives.CommentsClose CommentsPermalink

SEC. 204. FACILITATING LONGEVITY INSURANCE.

(a) In General- Paragraph (9) of section 401(a) is amended by inserting after subparagraph (G) the following new subparagraph:CommentsClose CommentsPermalink





`(H) LONGEVITY INSURANCE-CommentsClose CommentsPermalink





`(i) IN GENERAL- For purposes of this paragraph, any value attributable to longevity insurance shall be disregarded in determining the value of an employee's interest under a plan prior to the first date that payments are made under the longevity insurance.CommentsClose CommentsPermalink





`(ii) LONGEVITY INSURANCE DEFINED- For purposes of this subparagraph, the term `longevity insurance' means an annuity payable on behalf of the employee under which--CommentsClose CommentsPermalink





`(I) payments commence not later than 12 months following the calendar month in which the employee attains age 85 (or would have attained age 85),CommentsClose CommentsPermalink





`(II) payments are made in substantially equal periodic payments (not less frequently than annually) over the life of the employee or the joint lives of the employee and the employee's designated beneficiary, taking into account the rules of clause (i) of section 402(e)(7)(D), except as otherwise provided in subclause (III) of such section,CommentsClose CommentsPermalink





`(III) prior to the death of the employee, the annuity does not make available any commutation benefit, cash surrender value, or other similar feature, andCommentsClose CommentsPermalink





`(IV) except as provided in rules prescribed by the Secretary, in the case of an employee's death prior to the date that payments commence, the value of any death benefits paid may not exceed the premiums paid for such annuity, plus interest compounded annually at 3 percent.CommentsClose CommentsPermalink





`(iii) ADJUSTING AGE- For purposes of clause (ii)(I), the Secretary shall annually increase age 85 to reflect increases in life expectancy (as determined by the Secretary) that occur on or after January 1, 2006, except that any such increased age which is not a whole number shall be rounded to the next lower whole number.'.CommentsClose CommentsPermalink





(b) Rules- Not later than one year after the date of enactment of this Act, the Secretary of the Treasury shall prescribe rules under which all or a portion of a participant's benefits under any plan described in section 402(c)(8)(B) of the Internal Revenue Code of 1986 may be treated as longevity insurance under the rules of section 401(a)(9)(H) of such Code.CommentsClose CommentsPermalink





(c) Effective Date- The amendments made by this section shall apply to years beginning after December 31, 2008.CommentsClose CommentsPermalink

TITLE III--PROVISIONS ENSURING EQUITY IN DIVORCE

SEC. 301. SPECIAL RULES RELATING TO TREATMENT OF QUALIFIED DOMESTIC RELATIONS ORDERS.

(a) Preservation of Assets-CommentsClose CommentsPermalink





(1) AMENDMENT OF 1986 CODE- Section 414(p) is amended by redesignating paragraph (13) as paragraph (14) and by inserting after paragraph (12) the following new paragraph:CommentsClose CommentsPermalink





`(13) PRESERVATION OF ASSETS-CommentsClose CommentsPermalink





`(A) IN GENERAL- If a spouse or former spouse of a participant notifies a plan in writing that--CommentsClose CommentsPermalink





`(i) an action is pending pursuant to a State domestic relations law (including a community property law), andCommentsClose CommentsPermalink





`(ii) all or a portion of the benefits payable with respect to the participant under the plan are a subject of such action,CommentsClose CommentsPermalink





and includes with the notice evidence of the pendency of the action, the plan administrator shall, during the segregation period, separately account for 50 percent of such benefits. Any amounts so separately accounted for may not be distributed by the plan during the segregation period.CommentsClose CommentsPermalink





`(B) SEGREGATION PERIOD- For purposes of subparagraph (A), the term `segregation period' means the period--CommentsClose CommentsPermalink





`(i) beginning on the date of the receipt of the notice, andCommentsClose CommentsPermalink





`(ii) ending as of the close of the 90-day period beginning on such date (or, if earlier, the date of receipt of a domestic relations order with respect to the participant and the spouse or former spouse or the date the action is no longer pending).CommentsClose CommentsPermalink





The segregation period shall be extended for 1 or more additional periods described in the preceding sentence upon notice by the spouse or former spouse that the action described in subparagraph (A) is still pending as of the close of any prior segregation period.'CommentsClose CommentsPermalink





(2) AMENDMENT OF ERISA- Section 206(d)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1056(d)(3)) is amended by redesignating subparagraph (N) as subparagraph (O) and by inserting after subparagraph (M) the following new subparagraph:CommentsClose CommentsPermalink





`(N) PRESERVATION OF ASSETS-CommentsClose CommentsPermalink





`(i) IN GENERAL- If a spouse or former spouse of a participant notifies a plan in writing that--CommentsClose CommentsPermalink





`(I) an action is pending pursuant to a State domestic relations law (including a community property law), andCommentsClose CommentsPermalink





`(II) all or a portion of the benefits payable with respect to the participant under the plan are a subject of such action,CommentsClose CommentsPermalink





and includes with the notice evidence of the pendency of the action, the plan administrator shall, during the segregation period, separately account for 50 percent of such benefits. Any amounts so separately accounted for may not be distributed by the plan during the segregation period.CommentsClose CommentsPermalink





`(ii) SEGREGATION PERIOD- For purposes of clause (i), the term `segregation period' means the period--CommentsClose CommentsPermalink





`(I) beginning on the date of the receipt of the notice, andCommentsClose CommentsPermalink





`(II) ending as of the close of the 90-day period beginning on such date (or, if earlier, the date of receipt of a domestic relations order with respect to the participant and the spouse or former spouse or the date the action is no longer pending).CommentsClose CommentsPermalink





The segregation period shall be extended for 1 or more additional periods described in the preceding sentence upon notice by the spouse or former spouse that the action described in clause (i) is still pending as of the close of any prior segregation period.'CommentsClose CommentsPermalink





(b) Penalty for Failure To Provide Information Regarding Alternate Payees- Section 502(c) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132(c)) is amended by redesignating paragraph (8) as paragraph (9) and by inserting after paragraph (7) the following new paragraph:CommentsClose CommentsPermalink





`(8) FAILURE TO PROVIDE INFORMATION REGARDING ALTERNATE PAYEES- The Secretary may assess a civil penalty against any plan administrator of up to $100 a day from the date of the plan administrator's failure or refusal to provide the information the plan administrator is required to provide under regulations under this Act to prospective alternative payees under a domestic relations order under section 206(d)(3) or to the Secretary or any representative of a prospective alternative payee in connection with such an order.'CommentsClose CommentsPermalink





(c) Allocation of Plan Expenses in Complying With Domestic Relations Orders-CommentsClose CommentsPermalink





(1) AMENDMENT OF 1986 CODE- Section 414(p), as amended by subsection (a), is amended by redesignating paragraph (14) as paragraph (15) and by inserting after paragraph (13) the following new paragraph:CommentsClose CommentsPermalink





`(14) ALLOCATION OF EXPENSES- Any expenses incurred by a plan with respect to compliance with the requirements of this subsection shall not be allocated to an individual participant but rather shall be allocated among all participants on the basis of the relative value of each participant's share of the assets of the plan, on the basis of a flat amount per participant, or on any other reasonable basis provided for under the plan..'CommentsClose CommentsPermalink





(2) AMENDMENT OF ERISA- Section 206(d)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1056(d)(3)), as amended by subsection (a), is amended by redesignating subparagraph (O) as subparagraph (P) and by inserting after subparagraph (N) the following new subparagraph:CommentsClose CommentsPermalink





`(O) ALLOCATION OF EXPENSES- Any expenses incurred by a plan with respect to compliance with the requirements of this paragraph shall not be allocated to an individual participant but rather shall be allocated among all participants on the basis of the relative value of each participant's share of the assets of the plan, on the basis of a flat amount per participant, or on any other reasonable basis provided for under the plan.'CommentsClose CommentsPermalink

SEC. 302. ELIMINATION OF CURRENT CONNECTION REQUIREMENT UNDER RAILROAD RETIREMENT ACT FOR CERTAIN SURVIVORS.

(a) In General- Section 2(d)(1) of the Railroad Retirement Act of 1974 (45 U.S.C. 231a(d)(1)), in the matter preceding paragraph (i), is amended by inserting `, except with respect to survivors described in paragraph (i), (ii), or (v),' after `December 31, 1995) and'.CommentsClose CommentsPermalink





(b) Effective Dates-CommentsClose CommentsPermalink





(1) IN GENERAL- The amendment made by subsection (a) shall take effect on the date of enactment of this Act.CommentsClose CommentsPermalink





(2) RETROACTIVE APPLICATION TO CERTAIN SURVIVORS- If a survivor of a deceased employee would be entitled to an annuity by reason of the amendment made by subsection (a) but for the fact that the employee died before the date of the enactment of this Act, the survivor shall be entitled to such an annuity but only with respect to annuity payments for months beginning on or after such date. Appropriate adjustments shall be made in annuity payments of other individuals to reflect any annuity payable by reason of this paragraph.CommentsClose CommentsPermalink

SEC. 303. PERMITTING DIVORCED SPOUSES AND WIDOWS AND WIDOWERS TO REMARRY AFTER TURNING 60 WITHOUT A PENALTY UNDER RAILROAD RETIREMENT ACT.

(a) In General-CommentsClose CommentsPermalink





(1) DIVORCED SPOUSE- Section 2(c)(4) of the Railroad Retirement Act of 1974 (45 U.S.C. 231a(c)(4) is amended by adding at the end the following new sentence: `For purposes of paragraph (ii)(B), if a divorced wife marries after attaining age 60, such marriage shall be deemed not to have occurred.'CommentsClose CommentsPermalink





(2) WIDOWS AND WIDOWERS- Section 2(d)(1)(v) of the Railroad Retirement Act of 1974 (45 U.S.C. 231a(d)(1)(v)) is amended by adding at the end the following new sentence: `For purposes of this paragraph, if a widow marries after attaining age 60, such marriage shall be deemed not to have occurred.'CommentsClose CommentsPermalink





(b) Effective Dates-CommentsClose CommentsPermalink





(1) IN GENERAL- The amendments made by this section shall take effect on the date of enactment of this Act.CommentsClose CommentsPermalink





(2) RETROACTIVE APPLICATION- If a divorced wife, widow, or widower would be entitled to an annuity by reason of the amendments made by this section but for the fact the individual was married before the date of the enactment of this Act, the individual shall be entitled to such an annuity but only with respect to annuity payments for months beginning on or after such date. Appropriate adjustments shall be made in annuity payments of other individuals to reflect any annuity payable by reason of this paragraph.CommentsClose CommentsPermalink

SEC. 304. REPEAL OF JURISDICTIONAL REQUIREMENT FOR COURT TO TREAT MILITARY RETIREMENT PAY AS PROPERTY OF THE MILITARY MEMBER AND SPOUSE.

(a) In General- Section 1408(c) of title 10, United States Code, is amended by striking paragraph (4).CommentsClose CommentsPermalink





(b) Effective Date- The amendment made by this section shall apply to final decrees issued on or after the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 305. MODIFICATION OF REDUCTIONS IN DISPOSABLE RETIRED PAY FOR PAYMENTS IN COMPLIANCE WITH COURT ORDERS.

(a) In General- Section 1408(d) of title 10, United States Code, is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(8) Notwithstanding subsection (a)(4) or (e)(1), if the disposable retired pay of a member is reduced under subparagraph (B) of subsection (a)(4) as a result of a waiver required to receive compensation under title 38, or is reduced under subparagraph (C) of subsection (a)(4), the Secretary concerned shall pay (subject to any other limitation under this section) to the spouse or former spouse the lesser of --CommentsClose CommentsPermalink





`(A) the amount payable under the final court order from the disposable retired pay (determined without regard to such reductions), orCommentsClose CommentsPermalink





`(B) 100 percent of the disposable retired pay (determined after such reductions).'CommentsClose CommentsPermalink





(b) Effective Date- The amendment made by this section shall apply to payments of disposable retired pay attributable to periods beginning on or after the date of the enactment of this Act with respect to final court orders issued on, before, or after such date.CommentsClose CommentsPermalink

TITLE IV--PROVISIONS TO IMPROVE FINANCIAL LITERACY

SEC. 401. GRANTS TO COMMUNITY-BASED TAXPAYER CLINICS TO PROVIDE RETIREMENT SAVINGS ADVICE.

(a) In General- Section 7526 (relating to low-income taxpayer clinics) is amended by adding at the end the following:CommentsClose CommentsPermalink





`(d) Additional Grants for Retirement Savings Advice-CommentsClose CommentsPermalink





`(1) MAKING OF GRANTS- The Secretary may, subject to the availability of appropriated funds, make grants to qualified low-income taxpayer clinics to provide retirement savings counseling to low-income taxpayers.CommentsClose CommentsPermalink





`(2) USE OF GRANT FUNDS- Grants under paragraph (1) shall be used to--CommentsClose CommentsPermalink





`(A) develop the infrastructure necessary to carry out retirement savings counseling for low-income taxpayers, including the development of software to assist low-income taxpayers in beginning a retirement savings program, monitoring their savings behavior, and taking advantage of tax benefits provided under this title to assist in retirement savings,CommentsClose CommentsPermalink





`(B) develop partnerships with certified financial planners and other financial experts to assist in carrying out the retirement savings program, andCommentsClose CommentsPermalink





`(C) train advisors to assist low-income taxpayers with retirement savings.CommentsClose CommentsPermalink





`(3) CRITERIA FOR AWARDS- The provisions of subsection (c)(4) shall apply in determining whether to make a grant under paragraph (1).CommentsClose CommentsPermalink





`(4) LIMITATIONS AND SPECIAL RULES-CommentsClose CommentsPermalink





`(A) AGGREGATE LIMITATION- Unless otherwise provided by specific appropriations, the Secretary shall not allocate more than $25,000,000 per year (exclusive of costs of administering the program) to grants under paragraph (1).CommentsClose CommentsPermalink





`(B) LIMITATION ON ANNUAL GRANTS TO A CLINIC- The aggregate amount of grants which may be made under paragraph (1) to a clinic for a year shall not exceed $100,000.CommentsClose CommentsPermalink





`(C) MULTI-YEAR GRANTS- The provisions of subsection (c)(3) shall apply to grants under paragraph (1).CommentsClose CommentsPermalink





`(D) ADDITIONAL AMOUNTS- Grants under paragraph (1) shall be in addition to any grants under subsection (a).'CommentsClose CommentsPermalink





(b) Conforming Amendments-CommentsClose CommentsPermalink





(1) Section 7526(c) (relating to special rules and limitations) is amended by striking `this section' each place it appears and inserting `subsection (a)'.CommentsClose CommentsPermalink





(2) Section 7526(c)(3) is amended by inserting `under subsection (a)' after `award'.CommentsClose CommentsPermalink





(c) Authorization of Appropriations- There is authorized to be appropriated for each fiscal year beginning after September 30, 2007, $25,000,000 to carry out the provisions of this section.CommentsClose CommentsPermalink

SEC. 402. TREATMENT OF QUALIFIED RETIREMENT PLANNING SERVICES.

(a) In General- Subsection (m) of section 132 (defining qualified retirement services) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(4) NO CONSTRUCTIVE RECEIPT-CommentsClose CommentsPermalink





`(A) IN GENERAL- No amount shall be included in the gross income of any employee solely because the employee may choose between any qualified retirement planning services provided by an eligible investment advisor and compensation which would otherwise be includible in the gross income of such employee. The preceding sentence shall apply to highly compensated employees only if the choice described in such sentence is available on substantially the same terms to each member of the group of employees normally provided education and information regarding the employer's qualified employer plan.CommentsClose CommentsPermalink





`(B) LIMITATION- The maximum amount which may be excluded under subparagraph (A) with respect to any employee for any taxable year shall not exceed $1,000.CommentsClose CommentsPermalink





`(C) ELIGIBLE INVESTMENT ADVISER- For purposes of this paragraph, the term `eligible investment adviser' means, with respect to a plan, a person--CommentsClose CommentsPermalink





`(i) who--CommentsClose CommentsPermalink





`(I) is registered as an investment adviser under the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.),CommentsClose CommentsPermalink





`(II) is registered as an investment adviser under the laws of the State in which such adviser maintains the principal office and place of business of such adviser, but only if such State laws are consistent with section 203A of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3a),CommentsClose CommentsPermalink





`(III) is a bank or similar financial institution referred to in section 408(b)(4),CommentsClose CommentsPermalink





`(IV) is an insurance company qualified to do business under the laws of a State, orCommentsClose CommentsPermalink





`(V) is any other comparably qualified entity which satisfies such criteria as the Secretary determines appropriate, consistent with the purposes of this subsection, andCommentsClose CommentsPermalink





`(ii) who meets the requirements of subparagraph (D).CommentsClose CommentsPermalink





`(D) ADVISER REQUIREMENTS- The requirements of this subparagraph are met if every individual employed (or otherwise compensated) by a person described in subparagraph (C)(i) who provides investment advice on behalf of such person to any plan participant or beneficiary is--CommentsClose CommentsPermalink





`(i) an individual described in subclause (I) of subparagraph (C)(i),CommentsClose CommentsPermalink





`(ii) an individual described in subclause (II) of subparagraph (C)(i), but only if such State has an examination requirement to qualify for registration,CommentsClose CommentsPermalink





`(iii) registered as a broker or dealer under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),CommentsClose CommentsPermalink





`(iv) a registered representative as described in section 3(a)(18) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) or section 202(a)(17) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(17)), orCommentsClose CommentsPermalink





`(v) any other comparably qualified individual who satisfies such criteria as the Secretary determines appropriate, consistent with the purposes of this paragraph.CommentsClose CommentsPermalink





`(E) TERMINATION- This paragraph shall not apply to taxable years beginning after December 31, 2012.'.CommentsClose CommentsPermalink





(b) Conforming Amendments-CommentsClose CommentsPermalink





(1) Section 403(b)(3)(B) is amended by inserting `132(m)(4),' after `132(f)(4),'.CommentsClose CommentsPermalink





(2) Section 414(s)(2) is amended by inserting `132(m)(4),' after `132(f)(4),'.CommentsClose CommentsPermalink





(3) Section 415(c)(3)(D)(ii) is amended by inserting `132(m)(4),' after `132(f)(4),'.CommentsClose CommentsPermalink





(c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2007.CommentsClose CommentsPermalink

SEC. 403. RETIREMENT HANDBOOK AND RETIREMENT READINESS CHECKLIST.

(a) In General- Section 704 of the Social Security Act is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





`(f) Retirement Information-CommentsClose CommentsPermalink





`(1) IN GENERAL- The Commissioner, in consultation with the Social Security Advisory Board, shall prepare--CommentsClose CommentsPermalink





`(A) the financial reference handbook described in paragraph (2), andCommentsClose CommentsPermalink





`(B) the retirement readiness checklist described in paragraph (3).CommentsClose CommentsPermalink





`(2) FINANCIAL REFERENCE HANDBOOK- The handbook described in this paragraph is a pamphlet which--CommentsClose CommentsPermalink





`(A) includes definitions of basic financial terms,CommentsClose CommentsPermalink





`(B) contains a listing of financial issues and problems facing individuals who are retiring and explanations of methods of dealing with the issues and problems, andCommentsClose CommentsPermalink





`(C) is in a form readily understandable by the average retiree.CommentsClose CommentsPermalink





`(3) READINESS CHECKLIST- The checklist described in this paragraph is a list of questions that individuals need to consider in preparation for retirement, including the following:CommentsClose CommentsPermalink





`(A) What annual income will the individual need in retirement?CommentsClose CommentsPermalink





`(B) How many years will the individual live in retirement?CommentsClose CommentsPermalink





`(C) What will be the cost of Medicare premiums?CommentsClose CommentsPermalink





`(D) What will be the cost of insurance necessary to supplement Medicare?CommentsClose CommentsPermalink





`(E) How will savings be invested in retirement?CommentsClose CommentsPermalink





`(F) How will taxes affect your retirement income?CommentsClose CommentsPermalink





The checklist will include answers to the questions or directions as to where information is available to answer the questions. All information shall be in a form readily understandable to the average recipient of the checklist.CommentsClose CommentsPermalink





`(4) REVISIONS- The Commissioner shall periodically revise and update the handbook and checklist prepared under this subsection.CommentsClose CommentsPermalink





`(5) DISTRIBUTION OF MATERIALS-CommentsClose CommentsPermalink





`(A) HANDBOOK- The financial reference handbook described in paragraph (2) shall be included with materials provided to an individual when the individual first applies for benefits under title II and such other times as the Commissioner determines appropriate.CommentsClose CommentsPermalink





`(B) CHECKLIST- The retirement readiness checklist described in paragraph (3) shall be included with an individual's annual social security account statement provided under section 1143.'.CommentsClose CommentsPermalink





(b) Effective Date- The amendment made by this section shall take effect on the date of the enactment of this Act, but the handbooks and checklists required to be provided by such amendment shall be provided on or after January 1, 2009 (or such earlier date as the Commissioner of Social Security may provide).CommentsClose CommentsPermalink

TITLE V--INCENTIVES FOR SMALL BUSINESSES TO ESTABLISH AND MAINTAIN RETIREMENT PLANS FOR EMPLOYEES

SEC. 501. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF SMALL EMPLOYERS.

(a) In General- Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits), as amended by section 102, is amended by adding at the end the following new section:CommentsClose CommentsPermalink

`SEC. 45P. SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS.

`(a) General Rule- For purposes of section 38, in the case of an eligible employer, the small employer pension plan contribution credit determined under this section for any taxable year is an amount equal to 50 percent of the amount which would (but for subsection (f)(1)) be allowed as a deduction under section 404 for such taxable year for qualified employer contributions made to any qualified retirement plan on behalf of any employee who is not a highly compensated employee.CommentsClose CommentsPermalink





`(b) Credit Limited to 3 Years- The credit allowable by this section shall be allowed only with respect to the period of 3 taxable years beginning with the first taxable year for which a credit is allowable with respect to a plan under this section.CommentsClose CommentsPermalink





`(c) Qualified Employer Contribution- For purposes of this section--CommentsClose CommentsPermalink





`(1) DEFINED CONTRIBUTION PLANS- In the case of a defined contribution plan, the term `qualified employer contribution' means the amount of nonelective and matching contributions to the plan made by the employer on behalf of any employee who is not a highly compensated employee to the extent such amount does not exceed 3 percent of such employee's compensation from the employer for the year.CommentsClose CommentsPermalink





`(2) DEFINED BENEFIT PLANS- In the case of a defined benefit plan, the term `qualified employer contribution' means the amount of employer contributions to the plan made on behalf of any employee who is not a highly compensated employee to the extent that the accrued benefit of such employee derived from employer contributions for the year does not exceed the equivalent (as determined under regulations prescribed by the Secretary and without regard to contributions and benefits under the Social Security Act) of 3 percent of such employee's compensation from the employer for the year.CommentsClose CommentsPermalink





`(d) Qualified Retirement Plan-CommentsClose CommentsPermalink





`(1) IN GENERAL- The term `qualified retirement plan' means any plan described in section 401(a) which includes a trust exempt from tax under section 501(a), any simplified pension (as defined in section 408(k)), or any simple retirement account (as defined in section 408(p) if the following requirements are met with respect to such plan, pension, or account:CommentsClose CommentsPermalink





`(A) The contribution requirements of paragraph (2).CommentsClose CommentsPermalink





`(B) The vesting requirements of paragraph (3).CommentsClose CommentsPermalink





`(C) The distribution requirements of paragraph (4).CommentsClose CommentsPermalink





The contribution and vesting requirements of paragraphs (2) and (3) shall be treated as met in the case of a simple retirement account under a qualified salary reduction arrangement (as defined in section 408(p)(2)) or a cash or deferred arrangement meeting the requirements of section 401(k)(11).CommentsClose CommentsPermalink





`(2) CONTRIBUTION REQUIREMENTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- The requirements of this paragraph are met if, under the plan--CommentsClose CommentsPermalink





`(i) the employer is required to make nonelective contributions of at least 1 percent of compensation (or the equivalent thereof in the case of a defined benefit plan) for each employee who is not a highly compensated employee who is eligible to participate in the plan, andCommentsClose CommentsPermalink





`(ii) allocations of nonelective employer contributions, in the case of a defined contribution plan, are either in equal dollar amounts for all employees covered by the plan or bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of the employees covered by the plan (and an equivalent requirement is met with respect to a defined benefit plan).CommentsClose CommentsPermalink





`(B) COMPENSATION LIMITATION- The compensation taken into account under subparagraph (A) for any year shall not exceed the limitation in effect for such year under section 401(a)(17).CommentsClose CommentsPermalink





`(3) VESTING REQUIREMENTS- The requirements of this paragraph are met if the plan satisfies the requirements of either of the following subparagraphs:CommentsClose CommentsPermalink





`(A) 3-year VESTING- A plan satisfies the requirements of this subparagraph if an employee who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee's accrued benefit derived from employer contributions.CommentsClose CommentsPermalink





`(B) 5-year GRADED VESTING- A plan satisfies the requirements of this subparagraph if an employee has a nonforfeitable right to a percentage of the employee's accrued benefit derived from employer contributions determined under the following table:CommentsClose CommentsPermalink

1CommentsClose CommentsPermalink

--20CommentsClose CommentsPermalink

2CommentsClose CommentsPermalink

--40CommentsClose CommentsPermalink

3CommentsClose CommentsPermalink

--60CommentsClose CommentsPermalink

4CommentsClose CommentsPermalink

--80CommentsClose CommentsPermalink

5CommentsClose CommentsPermalink

--100.CommentsClose CommentsPermalink

`(4) DISTRIBUTION REQUIREMENTS- In the case of a profit-sharing or stock bonus plan, the requirements of this paragraph are met if, under the plan, qualified employer contributions are distributable only as provided in section 401(k)(2)(B).CommentsClose CommentsPermalink





`(e) Other Definitions- For purposes of this section--CommentsClose CommentsPermalink





`(1) ELIGIBLE EMPLOYER-CommentsClose CommentsPermalink





`(A) IN GENERAL- The term `eligible employer' means, with respect to any year, an employer which has no more than 25 employees who received at least $5,000 of compensation from the employer for the preceding year.CommentsClose CommentsPermalink





`(B) REQUIREMENT FOR NEW QUALIFIED EMPLOYER PLANS- Such term shall not include an employer if, during the 3-taxable year period immediately preceding the first taxable year for which the credit under this section is otherwise allowable for a qualified employer plan of the employer, the employer or any member of any controlled group including the employer (or any predecessor of either) established or maintained a qualified employer plan with respect to which contributions were made, or benefits were accrued, for substantially the same employees as are in the qualified employer plan.CommentsClose CommentsPermalink





`(2) HIGHLY COMPENSATED EMPLOYEE- The term `highly compensated employee' has the meaning given such term by section 414(q) (determined without regard to section 414(q)(1)(B)(ii)).CommentsClose CommentsPermalink





`(f) Special Rules-CommentsClose CommentsPermalink





`(1) DISALLOWANCE OF DEDUCTION- No deduction shall be allowed for that portion of the qualified employer contributions paid or incurred for the taxable year which is equal to the credit determined under subsection (a).CommentsClose CommentsPermalink





`(2) ELECTION NOT TO CLAIM CREDIT- This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.CommentsClose CommentsPermalink





`(3) AGGREGATION RULES- All persons treated as a single employer under subsection (a) or (b) of section 52, or subsection (n) or (o) of section 414, shall be treated as one person. All eligible employer plans shall be treated as 1 eligible employer plan.CommentsClose CommentsPermalink





`(g) Recapture of Credit on Forfeited Contributions-CommentsClose CommentsPermalink





`(1) IN GENERAL- Except as provided in paragraph (2), if any accrued benefit which is forfeitable by reason of subsection (d)(3) is forfeited, the employer's tax imposed by this chapter for the taxable year in which the forfeiture occurs shall be increased by 35 percent of the employer contributions from which such benefit is derived to the extent such contributions were taken into account in determining the credit under this section.CommentsClose CommentsPermalink





`(2) REALLOCATED CONTRIBUTIONS- Paragraph (1) shall not apply to any contribution which is reallocated by the employer under the plan to employees who are not highly compensated employees.'.CommentsClose CommentsPermalink





(b) Credit Allowed as Part of General Business Credit- Section 38(b) (defining current year business credit) , as amended by section 102, is amended by striking `and' at the end of paragraph (31), by striking the period at the end of paragraph (32) and inserting `, and', and by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(33) in the case of an eligible employer (as defined in section 45P(e)), the small employer pension plan contribution credit determined under section 45P(a).'.CommentsClose CommentsPermalink





(c) Conforming Amendments-CommentsClose CommentsPermalink





(1) Subsection (c) of section 196 is amended by striking `and' at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting `, and', and by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(14) the small employer pension plan contribution credit determined under section 45P(a).'.CommentsClose CommentsPermalink





(2) The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by section 102, is amended by adding at the end the following new item:CommentsClose CommentsPermalink





`Sec. 45P. Small employer pension plan contributions.'.CommentsClose CommentsPermalink





(d) Effective Date- The amendments made by this section shall apply to contributions paid or incurred in taxable years beginning after December 31, 2007.CommentsClose CommentsPermalink

SEC. 502. DEDUCTION FOR PENSION CONTRIBUTIONS ALLOWED IN COMPUTING NET EARNINGS FROM SELF-EMPLOYMENT.

(a) In General- Section 1402(a) (defining net earnings from self-employment) is amended by striking `and' at the end of paragraph (15), by striking the period at the end of paragraph (16) and inserting `, and', and by inserting after paragraph (16) the following new paragraph:CommentsClose CommentsPermalink





`(17) any deduction allowed under section 404 by reason of section 404(a)(8)(C) shall be allowed, except that the amount of such deduction shall be determined without regard to this paragraph.'.CommentsClose CommentsPermalink





(b) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2007.CommentsClose CommentsPermalink

SEC. 503. EXEMPTION OF DEFERRAL-ONLY QUALIFIED CASH OR DEFERRED ARRANGEMENTS FROM TOP-HEAVY PLAN RULES.

(a) In General- Section 416(g) (defining top-heavy plan) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(5) EXCEPTION FOR DEFERRAL-ONLY CASH OR DEFERRED ARRANGEMENTS- In the case of a plan which consists solely of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) under which no amounts may be contributed other than elective deferrals (as defined in section 402(g)(3)), such plan shall not be treated as a top-heavy plan.'.CommentsClose CommentsPermalink





(b) Effective Date- The amendments made by this section shall apply to years beginning after December 31, 2007.CommentsClose CommentsPermalink

SEC. 504. EXTENSION OF TIME FOR SMALL PENSION PLANS TO ADOPT REQUIRED PLAN QUALIFICATION AMENDMENTS.

(a) In General- In the case of an eligible small plan for which a remedial amendment period is established under Internal Revenue Procedure 2005-66 (or any regulation, revenue ruling, revenue procedure, or guidance providing for a similar period), no amendment to the plan necessary for the plan to meet the qualification requirements under the Internal Revenue Code of 1986 shall be required before the close of such period.CommentsClose CommentsPermalink





(b) Additional Requirements- Subsection (a) shall not apply to an eligible small plan unless--CommentsClose CommentsPermalink





(1) any amendment described in subsection (a) applies retroactively to the period during which such amendment would otherwise have been required to be in effect,CommentsClose CommentsPermalink





(2) the plan is operated during the period described in paragraph (1) as if the amendment were in effect, andCommentsClose CommentsPermalink





(3) the plan meets such requirements as the Secretary of the Treasury may prescribe to ensure that the Secretary, the Secretary of Labor, employers maintaining the plan, and participants and beneficiaries of the plan are adequately notified of the terms of the plan actually in effect during a plan year.CommentsClose CommentsPermalink





(c) Eligible Small Plan- For purposes of this section--CommentsClose CommentsPermalink





(1) IN GENERAL- The term `eligible small plan' means a plan which, as of the beginning of a remedial amendment or similar period described in subsection (a), had 100 or fewer participants. For purposes of this paragraph, all defined benefit plans which are single-employer plans and are maintained by the same employer (or any member of such employer's controlled group) shall be treated as 1 plan, but only participants with respect to such employer or member shall be taken into account.CommentsClose CommentsPermalink





(2) APPLICATION OF CERTAIN RULES IN DETERMINATION OF PLAN SIZE- For purposes of this subsection--CommentsClose CommentsPermalink





(A) PLANS NOT IN EXISTENCE IN PRECEDING YEAR- In the case of the first plan year of any plan, subparagraph (B) shall apply to such plan by taking into account the number of participants that the plan is reasonably expected to have on days during such first plan year.CommentsClose CommentsPermalink





(B) PREDECESSORS- Any reference in paragraph (1) to an employer shall include a reference to any predecessor of such employer.CommentsClose CommentsPermalink





(d) Effective Date- This section shall apply to amendments required to be adopted for plan years beginning after December 31, 2007.CommentsClose CommentsPermalink